Government Changing Rules AGAIN
July 12, 2017
Why Todays Increase In Prime Is A Good Thing
September 6, 2017
The Bank of Canada (BOC) raised the prime rate by 0.25% today. It’s a move that isn’t so much designed to slow the economy down, but to reduce the financial stimulus that was required to stave off the economic impact from the collapse of oil prices back in 2015. Why increase rates now when the economy isn’t 100%? Because it takes about 1.5 years to 2 years for a rate hike to fully take affect, also the BOC needs some of its ammunition back just in case the economy runs into another hiccup or the zombie apocalypse.
But I digress….
The comfort level for increasing prime is based on the fact that the Euro area and US economies are showing signs of slow, but consistent growth. Coupled with businesses spending more money and business growth occurring across various industries, the BOC feels they can confidently take back of some of the stimulus while still keeping things moving forward in the economy. Will there be another increase? Yes, but the issue is when. The BOC statement today would lead us to believe that March might be a possibility.
Bottom line this is a good thing.
Key Points From The Bank of Canada Announcement
- Prime rate raised by 0.25 percent
- Global economic outlook improving
- US jobs and business investment growth
- Consumer spending expected to slow in Q4
- Economy has adjusted to lower oil prices
How Your Mortgage Is Impacted
- Banks yet to announce new prime rate
- Fixed rates increased last week in anticipation of prime’s increase
- Variable mortgage rates discounts expected to increase
- Rate holds for purchases or maturities now available until the beginning of November.
Interest rates for the next quarter
Also very subtly mentioned in the BOC statement is the expectation that consumer spending will be slowing. Could this be due to the upcoming mortgage rule changes just announced last week? We wrote a post on our blog where we talk about what the government is proposing, and how it could impact the real estate market.
Where are the fixed interest rates going for the next three months? I would expect that we could see another slight increase, but only if the US shows more labour gains and the Euro area shows signs of growth as well. The more you hear the word “growth in the economy” from the various news outlets, the more you can expect fixed rates to creep up, along with the prime rate following a month or two after.
The next Bank of Canada meeting is September 6th, 2017
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