There’s been much attention devoted to Brexit, with good reason. In an historic referendum, a majority of voters in Great Britain opted out of the European Union (EU) – a partnership that came into existence after the Second World War. It morphed into an economic and political union of 28 countries working as a single market, which allows free movement of goods, capital, services and people between member states.
The negative effects of this decision was immediate – markets dropped, currency values fell and trade relations have become shaky. The reason – uncertainty. No one really knows what will happen — not the economists, not the leaders of the remaining countries, not even those who voted to leave. And it may take years to find out.
What we do know, however, is the impact in Canada and what it could mean for our housing market. Here a six ways that Brexit may affect us:
1. Interest rates will remain low
The immediate impact of the post-Brexit vote on Canada’s economy will be pressure to keep interest rates at historically low levels, according to BMO chief economist Douglas Porter. That’s good news for consumers. TD Bank economists suggested a U.S. interest rate hike could be delayed, which will further stabilize our Loonie. The Bank of Canada’s next interest rate announcement is July 13, but it’s not expected to move on rates.
2. The Loonie
The Loonie fell fast after the vote. In the end, it lost more than a full cent, closing at 76.93 cents US. It’s been fluctuating since but is holding at approx. 76.5 cents so far. On a positive note: If you’re headed to the U.K., chances are you’ll encounter a weaker pound and perhaps even discounted prices as Europe grapples with the economic fallout.
3. Your savings
Your investment portfolio may have taken a bit of a hit if you have equities, especially European equities; however, most economists don’t believe another financial crisis is at hand. Markets tend to overreact at first then start to reclaim some of their losses. Although Brexit is a concern, the economy has not yet taken a direct hit.
4. The global economy
We’re not headed for another global recession; however global growth may be impacted. Much of that depends on what the other EU countries decide to do. This could impact the growth of the Canadian economy. Again, no one really knows yet.
5. Foreign investment in our real estate
Canada has a challenge right now. The federal government has an opportunity to play a role on where foreign investment money goes. If foreign investors want the stability of Canada’s real estate market, then it doesn’t matter what part of the country they invest in, whether it’s a $1 million property in Vancouver or five properties in St. John’s, Newfoundland worth $1 million. This could ease the pressure on hot markets like Toronto and Vancouver.
6. The housing market
The U.S., which appeared set to hike rates in September, will likely delay that plan now. In Canada, interest rates will almost certainly remain low for even longer. In the short term, property values will go up.
While Brexit has created uncertainty in a dramatic way, there is an upside. If you’re searching for a new home or want to refinance an existing mortgage you can take advantage of low interest rates and potentially save thousands of dollars in interest in the long run.
Act now, call me today.
Guy Ward is a Mortgage Broker in Calgary, Alberta with TMG (The Mortgage Group Alberta) and can be contacted at WWW.GUYTHEMORTGAGEGUY.COM