Prime Increases But Is The BOC Done for 2018?
July 11, 2018
Credit, Income or Net Worth – What’s Most Important To The Lenders?
September 21, 2018
To the surprise of 50 per cent of economists, the Bank of Canada (BOC) left the prime rate unchanged today.
Two key factors kept the bank rate gun holstered: 1. NAFTA negotiations and 2. Signs that inflation is still below the 2 per cent range.
Though the BOC took a pass meeting for a rate hike, a ratified trade agreement with the US and signs of wage growth could tip the scales and provide support for another 25bps increase in prime.
Key Points From The Bank of Canada Announcement
- Prime rate remains unchanged
- NAFTA negotiations outcome is key for future rate decisions
- Housing prices levelling off
- Wage growth still in check despite low unemployment
How Your Mortgage Is Impacted
- Fixed-rate mortgages have slightly lowered
- Rate specials expected to come to an end
- Rate holds available for purchases until the January 2019!
What does this mean for your mortgage?
As we have said in our previous posts, fixed mortgage rates are based on the bond market, which tries to anticipate where the economy going. After the last BOC meeting in July, the 5 year government bond increased by 0.32 per cent, reaching it’s peak in early August. While some of that increase made its way into the 5 year fixed mortgage rate, a lot didn’t given the competitive nature of the spring/summer market. Now that the BOC has gone back to a “wait and see” approach, the bond market has eased a bit. Do we expect to see that translate into decreasing rates? Probably not. The reason is that as we come into the fall, competition in the mortgage market eases, with interest rates usually creeping up by mid-October.
So if you have a November or December mortgage maturing, and there is a chance that fixed rates will rise by mid-October, are you out of luck? Not at all! People often don’t realize that we can hold an interest rate for up to four months – even for a mortgage maturity! So with a bit of planning, you can take advantage of the competitive mortgage environment. The best part – there is no cost to do a rate hold, and no obligation to go with the lender.
So as the saying goes, you can have your cake and eat it too! And after all…who doesn’t like cake?!
If you have any questions about rates, the new mortgage rules or just need to bounce an idea off our team, as always please don’t hesitate to give us a call.
The next Bank of Canada meeting is October 24th, 2018.
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