Prime Increases Despite NAFTA Discussions
January 17, 2018
Are Variable Mortgages Becoming More Attractive?
April 19, 2018
The Bank of Canada (BOC) left the prime rate unchanged today. Which means the prime is 3.45% with most institutions, or 3.6% if you bank with TD. The key reason for not increasing prime was due to the impact of Trump’s proposed steel tariffs, and core inflation running below the Bank’s target level.
If the proposed tariffs go through, there could be an opportunity for lower fixed mortgage rates and real estate in the Lower Mainland.
Key Points From The Bank of Canada Announcement
- Prime rate left unchanged at 3.45%
- Wage growth in Canada slowly coming
- Canadian Business spending growing
- Canadian production almost at capacity
- Inflation still below 2% target rate
- Global growth continues
How Your Mortgage Is Impacted
- Fixed-rate mortgages could potentially decrease
- Variable rate mortgages starting to improve
- Rate holds available for purchases until the beginning of July
Where are rates and housing prices going?
As always, I have to preface this section with the usual disclaimer – that nobody can predict the direction of rates or real estate prices, and that these next few paragraphs are based on my observations from being in the industry for over 20 years.
Now that we have that out of the way, here are my thoughts in a series of logic statements:
- IF the steel tariffs come in:
- THEN the outcome could be:
- Provincial migration from manufacturing provinces/cities as people cash out their real estate holdings and move to BC or Alberta in hopes of living in a more diverse economic climate. ie. think Ontario 1992 – 1994
- THEN the outcome could be:
- IF the Stock Market further decreases:
- THEN the outcome could be:
- Money moving from stocks to bonds, which could translate to lower interest in the short term.
- THEN the outcome could be:
- IF the above two factors come into play this spring:
- THEN the outcome could be:
- House prices could continue to edge up, or at a minimum stay at their current level.
- Condos will continue to appreciate due to migration and the impact of the Stress Test on the amount buyers can qualify for.
- THEN the outcome could be:
As we always say, bad news for the economy is good news for your mortgage. So the more NAFTA/Trump noise that is reported in the news, the greater potential for a slight drop in interest rates.
The next Bank of Canada meeting is April 18th, 2018.
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