QUOTE (wgraham @ Aug 10 2010, 11:55 AM)
Well with the current poll results it would seem that REIN members feel that there is a fair bit of upside risk and no downside. So the question I would like to ask now is what are you doing about it? How are you counteracting the risk that the Bank of Canada will continue its rate hike?
In this neck of the woods, the rental market is too fragile to consider raising rents to offset the higher interest rate costs. So cost cutting remains and we're trying to do that on a continuous basis already, i.e. limited opportunity to cut more.
Also, the interest rate increase would only affect people with variable rate mortgages. I understand that new 5 year mortgages, which are not depending on the BoC rate, are actually on the decline or stable.
So... unless your leveraged to the hilt, the increase interest expenses will be limited. An increase on a typical variable of $150K will be $375 per year or $31.25 per month for every 0.25% BoC rate increase. I don't think that is deadly especially if you were anticipating these increases and stress tested your economic numbers.
Also, unless the economy improves rather than double dips or stagnates, the chance of further interest rate increases is limited to non-existent. On the otherhand, if we do get more good economic growth
we should be able to offset increasing rates with increased rental rates.
So no need to panic.