Opposing Economic Forces Prompts BOC To Hold
December 6, 2017
Rates on Hold Due To Trump Steal Tariffs
March 7, 2018
The Bank of Canada (BOC) increased the prime lending rate today by 0.25%, meaning the prime rate by the end of business today should end up at 3.45% unless you bank with TD Canada Trust where it will be 3.6%.
Despite NAFTA being potentially re-written, the Governor found comfort to increase the lending rate due to the global economic growth, tight labour markets and growing exports. This move suggests that the Canadian economy is on solid footing and can handle any shocks brought on by The Donald.
Some key economic indicators suggest that 2018 could be a great year for Canadians, but 2019 could see a bit of a slow down. With that in mind, we are adjusting our advice for clients with current financing needs so they can better harness the changing economic situation.
Key Points From The Bank of Canada Announcement
- Prime rate increased by 0.25 percent
- Global economic growth expected to continue
- Canadian employment figures spiked up
- Canadian production almost at capacity
- Business spending continues to grow
How Your Mortgage Is Impacted
- Fixed-rate mortgages have increased but should level off
- Variable rate mortgages discounts could improve
- Rate holds available for purchases until mid-May 2018
Where are interest rates going?
With the sudden avalanche of positive economic news, bond rates have taken off which has led to an uptick in mortgage interest rates. As a result, we are hearing from clients wanting to lock in their variable mortgage terms or renew into longer terms. We are recommending to clients not to rush into anything for the following three reasons. First: The spring specials are coming Second: With the BOC comments suggesting that 2019 might see a slow down in economic growth, there might be an opportunity for interest savings in the variable or shorter term products. Third: The presidential election in 2020. Usually, optimism surrounds a presidential election which translates into lower bond rates, which in turns translates into better mortgage rates.
These three factors don’t necessarily make lower rates in the future a sure thing, but it does put the odds in favour of it happening. Having said that, as always with any advice we give, choosing the right mortgage product has to be done in the context of your personal financial situation and your life goals. As they say, you’re unique…just like everyone else!
The next Bank of Canada meeting is March 7th, 2018.
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