Key rate shift may aid Island forestry firms

July 17, 2015

By: Nanaimo Daily News

A cut to Canada’s key lending rate isn’t expected to affect housing sales much but it could improve the bottom line for Island forest companies.

The Bank of Canada cut its target for the overnight rate by a quarter of a percentage point to 0.5 per cent, sending the Canadian dollar tumbling to its lowest levels in years.

The key rate affects what financial institutions pay for short-term borrowing, which affects the cost of consumer borrowing.

The rate cut is to stimulate the Canadian economy, which has been hurt by a double whammy – oil oversupply and falling demand for goods, services and commodities from the U.S. and China.

The rate cut drew a warning from some economists it could overstimulate the real estate industry, which could precede a collapse later, but real estate agents expect little impact locally. Island housing markets are

largely driven by retirees, who don’t rely heavily on mortgages, said Margo Hoffman, Vancouver Island Real Estate Board president-elect.

In Parksville, which is part of her market area, the rental vacancy rate stands at 0.1 per cent, “so it will encourage some people to buy rental and have that income rather than have their money sit in the bank,” Hoffman said.

“In the rest of the VIREB area, it probably won’t have a significant effect.”

Timberwest is watching the Canadian dollar, which dropped suddenly with Wednesday’s announcement from the Bank of Canada.

“When the dollar goes down, in the short and the medium term, that benefits us, because we get a better return on our forest products,” said Domenico Iannidinardo, chief forester with Timberwest Nanaimo.

 

By: Nanaimo Daily News

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