OTTAWA – March 4th, 2008 – The interest rate cut announced today by the Bank of Canada will help Canadian home owners and buyers, according to The Canadian Real Estate Association.

The Bank of Canada cut its benchmark overnight lending rate by one-half of one percentage point to 3 1/2 per cent on March 4th, and signaled further cuts in the near future. The trend-setting Bank rate, which is set 0.25 percentage points above the overnight lending rate, now stands at 3.75 per cent.

“The threat of inflation is being eclipsed by concerns about slower economic growth, so the Bank of Canada cut its trend-setting bank rate to boost growth,” said CREA Chief Economist Gregory Klump. “Financial market turmoil will remain a downside risk to growth for some time. This means the Bank will probably continue lowering interest rates.”

Lower lending rates will help offset the effect of tightening credit conditions and allow homeowners to obtain better mortgage terms. This will also benefit Canadian homeowners dealing with variable rate mortgages.

“The Bank of Canada today acknowledged that the U.S. economic slowdown was likely to be deeper and more prolonged than it projected less than six weeks ago,” said CREA President Ann Bosley. “When the Bank decided to lower interest rates today, the advertised five-year conventional mortgage rate stood at 7.29 per cent. This is less than one per cent above where it stood at the beginning of last year.

Competition among mortgage lenders remains stiff, which continues to help many borrowers negotiate discounts from advertised rates.“ Declining interest rates and a rebound in economic growth are factored into the CREA MLS® 2008 market forecast. “MLS® sales activity will stay strong and reach the second highest level on record this year. Residential MLS® prices are also expected to continue rising. Additional cuts to mortgage interest rates are good news for housing affordability and Canadian housing demand,” Klump added.

“The most serious downsides to Ontario's economy will continue to stick for some time, yet we do see economic growth improving by a full percentage point in 2009,” said Craig Wright, senior vice-president and chief economist, RBC. “While a recession is not impossible, we believe that the province can avoid one despite a growing list of worries.”

A decline in new home construction since the 2003 peak will help to slow the province’s economy, with numbers expected to decrease from 68, 100 in 2007 to 66, 200 in 2008. Other factors weighing down the province's economy, according to the report, include: an elevated Canadian dollar that is hammering away at manufacturers' export competitiveness; negative exposure to weak U.S. housing and automotive markets; strong competition from Asian manufactured goods; and weak growth in machinery and equipment investment despite capital cheapening influences of a strong currency.

However, the report notes that forecasted currency depreciation, a modest weakening in commodity prices, and acceleration in U.S. growth later this year should help boost Ontario's economy in 2008. Auto production should also grow in late 2008 and into 2009 as U.S. demand stabilizes, a new assembly plant swings into production, and new models are introduced. A reasonably vibrant services sector, strength in the tech sector, job growth and healthy consumer spending will also help bridge the gap.

“Modest fiscal stimulus announced in the fall 2007 provincial budget is welcome news, especially regarding taxes,” said Wright. “However, federal-provincial cooperation is still needed to achieve sales tax harmony. Ontario's lack of tax competitiveness is a major concern as, unlike B.C., it still applies the provincial sales tax to capital goods.”