Hi itulipers, this is my first post on the board but I've been reading for a year or so now. I noticed today that the Canadian banks lowered fixed mortgage rates by 10-15 basis points, citing the Greek (EU) crisis and subsuquent market pullback and flight to Canadian bonds as the primary reason for doing this.


In my view, this will effectlively prolong and enhance Canada's real estate bubble. The B of C has hinted at rate increases for the end of June but in the event of a further market pullback, will these increases be put on hold? Given that ongoing market pullbacks are highly likely on and off for the next several years, can we legitmately expect rates to rise in rapid and linear fashion, as has been speculated widely by many individuals? Also, I'm interested in hearing peoples interpretation of how the deflation of the Canadian real estate bubble might occur. Obviously the key indicators suggest that we are very frothy in some parts of Canada and I expect a sizeable correction but I'm starting to think that the bubble popping may be further off than I thought (I was thinking it would start this summer and fall), especially if market turmoil in the EU has the effect on mortgage rates that it did today. Thoughts?

Things to ponder:

1) Western Canada is loaded with natural resources, which typically gives Canada a positive balance of trade
2) Our own ugly debt problem has not been acknowledged but still exists although perhaps not to the extent to the US.
3) Are our banks as healthy as reported? US banks looked healthy prior to a collapse in real estate as well.
4) CHMC is still guaranteeing mortgages that banks probably wouldn't touch. I wonder what would cause that situation to end.

Thinks in advance for any thoughts that you have.