The prime lending rate was left unchanged today by the Bank of Canada (BOC), which is not a shocker as I’m sure the Vegas odds are higher that Trudeau will embarrass himself on the global stage at least one more time before rates move.
As I write this last post for the decade I’ve come to realize that reading through the BOC announcement is like deciphering spy code. There are a lot of clues left in their well written economic prose, and when you combine it with other economic intel (intelligence) you can get a sense of what the Governor is trying to allude to. And to answer your question, yes I have been binge watching Jack Ryan on Prime.
So what information do I have to report back to HQ?
If you scroll down this post you find some BOC tidbits that may have slipped under most peoples radar:
Key Points From The Bank of Canada Announcement
- Prime rate remains unchanged at 3.95%
- Trade Wars are still the economic wild card
- Business investment showed an unexpected increase
- Global economy growing, but still fragile
- Inflation expected to stay at target level for 2 years (WOW!)
How Your Mortgage Is Impacted
- Fixed rates should hold if the trade wars remain at a stalemate
- Bond Yields have edged lower, but only a couple of rate specials have appeared
- Rate holds available until just past April Fools ( no joke ! )
Connecting the dots …
So as I hinted at the beginning of this post there were some big comments made by the BOC that I’m sure will not be making headlines:
What was said: Inflation expected to stay at the target level for the next two years.
Why that is important: This is like the RCMP telling you where the radar traps will be for the next two years. The BOC basically said don’t expect any rate increases.
What was said: Consumer spending underpinned by stronger wage growth.
Why that is important: This is like a marathon runner getting their second wind at the 22 mile mark. The consumer was the hero that pulled the global economy out of the great recession, but they’ve been running out of steam which has led to accumulating debt. Now that we are seeing some wage growth, people will be able to have some cushion and hopefully pay some of that debt off.
What was said: Investment spending showed unexpected strong growth
Why that is important: This is like that exciting moment in the a relay race where the tired, spent runner hands the baton to the other, and the next runner sprints off full of vigor in the next leg of the race. In the economic relay race the consumer has been trying to do th hand off to the business sector for about 2 years. But because of all the economic uncertainty businesses have been reluctant to take the baton. As result they’ve been sitting on piles of cash. The fact that they are opening up the purse strings means that they are feeling confident about the direction of the economy. Let’s hope they run with it!
What does these three factors mean for your mortgage? That’s where get to the bottom line:
The Bottom Line:
So with the above in mind what are we advising our clients?
If the economy continues to stay mired in uncertainty we are expecting the cost of funds to remain relatively cheap for the banks. This should translate into rates staying close to where they are now, with the occasional rate special thrown out there by a lender or two. Having said that, the time to use the services of an independent mortgage advisor could not be more important.
With some lenders wrapping up their year ends in October, and others with December year ends, there is a huge variance in rates in the market place. We are seeing some lenders sitting back waiting for the spring market, while others are trying to meet their year end targets and offering super low rates.
The selection in mortgage products is also mind boggling. Our internal rate sheet has over 15 lenders, that combined, offer over 45 products. As a consumer how do you decipher that?! You don’t you hire a professional – who BTW doesn’t cost you anything.
Besides – wouldn’t you rather be on the slopes vs trying to figure out what to do with your mortgage?
Do you have a mortgage coming up for renewal in the spring?
**Ask me how you could potentially avoid the Stress Test!**
The next Bank of Canada meeting is Janaury 22nd, 2020.
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Disclaimer notice: The views expressed in this blog post are of our opinion. The information has been sourced from the Bank of Canada, and several Canadian news sources. Any forecasts or expectations of the direction of interest rates are based on the collective experience of the Nishka Riley Mortgage Team, and as such any recommendations must be taken within the context of your personal situation. As with any forecast, there is no way to guarantee the outcome of the real estate market or interests rates and in no way is a guarantee implied.