Key Points From The Bank of Canada Announcement
- Prime rate not changed
- US economy pointing to solid growth
- Economic growth in Canada revised slightly down
- British Exit from the UK will slightly affect North America
- Wage growth is expected to remain stagnant until 2018
How Your Mortgage Is Impacted
- Prime rate remains at 2.7%
- Variable rate mortgage discounts getting better
- Fixed rates at an all time low due to Brexit uncertainty
- Rate holds for purchases or maturities now available until the end of November
Where are rates heading?
All joking aside. Here are my real thoughts on the economy and I’ll make it quick since you’ve indulged me with my rant above.
- Brexit:
- Note a huge event for our economy given that Britain is not a significant trading partner.
- Where it impacts your mortgage is the rush of money heading out of Europe into North American bonds. This will keep rates relatively low.
- Inflation:
- Inflation is what drives both fixed and variable rates.
- The BOC has all but said it will keep them on hold until early 2018
- Production Capacity
- This is a key leading inflation indicator
- It measures how efficient the workforce is and how much can the workforce produce before more workers need to be hired or wages increased to keep existing workers.
- This number is super low and not expected to see pressure until 2018
Given the economic uncertainty, and the abundance of capacity in the labour market, we expect the prime rate to remain as is for at least another year. Fixed rates however are a different story. Currently, we are at historic lows due to the global economic uncertainty. How long these rates can last will only depend on how much the lenders have gone to market to secure them, and how competitive the “Spring” market remains. The next 60 to 90 days could be “interesting”.
Wondering how to structure your mortgage for 2016?
Give me a call! We can discuss how your current financial situation fits into today’s economic environment and how the right mortgage strategy could save you thousands of dollars over the term of your mortgage.
The next Bank of Canada meeting is September 7th, 2016
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