The Bank of Canada held its overnight rate at 0.25 per cent this morning, a level it considers its effective lower bound. In the statement accompanying the decision, the Bank noted that incoming data seems to signal that the impact of COVID-19 on the economy has peaked, though there remains significant uncertainty regarding the outlook. The Bank further commented that the Canadian economy appears to have avoided the most severe scenario the Bank had previously presented as a possible outcome of COVID-19, though it does expect a 10-20 per cent decline in the level of GDP in the second quarter. However, positive growth is expected to resume in the third quarter.
Like the Bank, BCREA is projecting that the Canadian, and BC economy will start to recover in the third quarter. Positive signs of recovery are emerging in the housing market, with sales and listings activity improving from April lows. Actions by the Bank of Canada have helped ease rising once risk premiums, leading to 5-year mortgage rates falling to near record lows. Those low rates, along with building pent-up demand should lead to a healthy recovery in home sales over the next 12 months.
Copyright British Columbia Real Estate Association. Reprinted with permission.