On his last day in the office, the Bank of Canada Governor Stephen Poloz left without much fanfare and maintained the current prime lending rate.
Keep in mind that the prime rate is not the only fuel to provide thrust to this stalling economy. Like a scene from The Fast and The Furious, it’s the famous “Red NOS” button that, when pressed, launches our hero across the finish line to victory. For the Governor, the magic “red button” is the bond buyback program.
In today’s press release, the Governor had mentioned that he was taking his finger off the “red button” by reducing the frequency of the buyback program. This is good news because it means two things: 1st The finish line is in sight, and 2nd the BOC feels confident enough to let the economy heal itself.
The new Governor Tiff Macklem will take over from Mr. Poloz as of today. Some say the move to not ask Mr. Poloz to stay on during this crisis was politically motivated since he was appointed by Stephen Harper. Mr. Macklem, a career civil servant and academic, has definitely been thrown into the fire, and time will tell if he has the experience to pull this economy out of said fire.
So with bond buybacks tapering off and businesses opening up, what does it mean to your mortgage? Scroll down below to find out.
Key Points From The Bank of Canada Announcement
- Prime remains unchanged
- Bond buyback program tapered off
- BOC expects growth to resume in Q3
- Commodities prices are lifting off their bottoms
How Your Mortgage Is Impacted
- Bond Yields have decreased since last update
- Fixed rates have lowered and expected to remain level
- Rate holds available until just past Thanksgiving!
Picking ourselves up and dusting ourselves off.
It’s been 49 days since my last post and as we gradually return back to normal there has been a feeling of rebirth that I’m sensing in my conversations with my clients and new inquiries. Though the USA’s recent events have brought a dark cloud, I feel that this COVID period has given us all the permission to step back from the busyness to observe and evaluate our lives. Personally, I’ve made the mental shift to mark June 1st as my “New Year,” and I’ve drawn a line in the sand looking to the future from this point, and not to the past six months of this year. And I’m excited for what the future holds – here’s why.
As the businesses begin to open up and the economy gets back on its feet, it will take a bit of time before we start to see interest rates rise. We need to see confidence return to both the consumer and businesses. Having said that, I’ve personally seen a significant increase in pre-approval requests and clients’ writing offers. Additionally, my team which is spread out as far as the Kootenay’s, is also seeing increased activity, which signifies that the shift in consumer confidence is not just a local phenomenon.
Lower rates, and restricted travel will probably lead to home renovations. This means the value of the housing stock will improve, though we won’t see the fruits of that until it translates to a Realtor™ sign going on the lawn. However, it does bode well for supporting prices and limited inventory, because who wants to sell a home they just renovated?!
Yes real estate sales may be down by historic double-digit figures, but we aren’t seeing prices coming in that much lower than in November of last year. In fact we are starting to see the return of multiple offers, mostly driven by the lack of supply.
Getting the economy back on track is going to take some time AND some patience. That means we will probably see rates stay in this lower range for the next 3 to 6 months. Combine this with a delayed spring real estate market and you have the makings of banks offering super competitive pricing to as they fight for business. As a mortgage broker I’m super excited to be able to offer multiple options during this time!
Having said that here is where I think the opportunities will be over the next 90 days: ( I literally copied and pasted this from my last post because it’s even more relevant today than 49 days ago)
- Capturing the value of your home:
- Home values may dip down for a period, given that home sales have slowed. If you want to capture your home’s current value, now might be the time to consider refinancing and have that money working for you in other areas.
- Get ready for opportunities:
- If you’ve been considering buying an investment property now might be the ideal time to get ready.
- Or if you want to take advantage of the opportunities in the stock market, now is a great time to simply buy and hold the S&P and Nasdaq index – super simple and super cheap.
- Is your mortgage coming up for maturity?
- Don’t rush to sign that renewal. Rates could be decreasing in the next 30 to 60 days. Give us a call to review what your options are in the context of your financial situation. Don’t get sucked into the “take it or leave” it renewal call that the banks are famous for these days.
- Don’t forget we have access to lenders that can avoid the stress test.
Stay well, stay safe and remeber you can now enjoy your craft beer or wine in public now! ( Well in North Vancouver anyway ! )
The next Bank of Canada meeting is July 15th, 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.