Canada cuts interest rates

Toronto, Canada, where property prices fly higher than the rest of the country Photo: Phil Grondin

The surprise move marks the first time Canada has changed its interest rate in more than four years. The bank's official statement said that the decision was in response to falling oil prices, which it said "will be negative for growth and underlying inflation in Canada".

With inflation already beginning to reflect the Change in oil prices, the Bank of Canada says it has taken action to support the broader economic growth in the country, which the Canadian Real Estate Association say will be "another shoulder against the wheel pushing the economy in this direction".

"It’s a shocker," Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, told the Financial Post. "It is an aggressive move. It speaks volumes about where the Bank of Canada Sees the economy and inflation going."

What will it mean for the country's property market? Some fear that it could contribute to concerns surrounding a housing bubble.

Last month, the Bank of Canada said that property prices were overvalued by up to 30 per cent, notes Bloomberg. Indeed, while the latest statistics from the CREA show that national home sales activity was down on a month-over-month basis in December 2014, prices in major cities have risen significantly: in Calgary, prices climbed 8.8 per cent year-on-year, in Greater Toronto, by 7.89 per cent, and in Greater Vancouver, 5.82 per cent. By contrast, prices in Regina declined by 3.48 per cent. Since 2008, values have risen even more dramatically, with Toronto seeing prices leaping 49 per cent and Vancouver by 27 per cent.

Bubble fears are nothing new for canada. According to one agency, one in three sales of Vancouver property went to Chinese buyers in 2013; a trend that prompted Canada to end its investment visa scheme over worries that foreign investment could drive up the expensive market even higher.

Others, though, are less concerned, citing the small scale of the cut, which would not affect mortgage payments very significantly.

Mortgage broker Michelle Byman told CBC: "It will help people that are buying. But I don't think that's going to fuel anything more than what's already going on in the market."