Written By: Catherine Ellis

The Bank of Canada met this week to determine whether to increase the Bank of Canada Overnight Lending Rate (which dictates the Prime Rate) or maintain it’s current overnight rate at 1.25% currently.

This week The Bank of Canada maintained its target for the overnight rate at 1.25%, which the prime rate is currently set at 2.2% above with the majority of lenders at 3.45%, with the exception of TD at 3.60%.

Therefore there will be no changes to your interest rate of your HELOC’s or Variable Rate Mortgages at this stage, the next meeting will be July 11th, 2018.

Main factors in the decision to maintain the rate:

  • Uncertainty about Trade Policies
  • Inflation was close to target of 2%
  • Housing re-sale has remained soft into the second quarter – with the adjustment of new mortgage guidelines and higher borrowing rates.

Looking forward – Economic Outlook & the Next Few Months:

  • Global Oil Prices have been higher than assumed and rising
  • Inflation is expected to climb above 2% in the coming months – with rising gasoline prices
  • Export of Goods & Equipment – showing growth in investment and economic development
  • Expected Solid Income Growth – will assist with an expected rise in home sales and consumption moving forward in the coming months.
  • Based on the above the Governing Council view that higher interest rates will be needed to keep inflation on target at 2% (the higher the cost of borrowing assists the government in stabilizing the market and keeping it on track).

They are aiming to take a gradual approach, and see how the housing sector, gas prices, employment and income growth perform over the coming months’ prior to making a decision whether to rise the rate on the July 11th, 2018 announcement.

I am here to answer any questions, concerns and to keep you in the loop every step of the way. Currently the difference between fixed and variable rate mortgages is between -.75%-1.05% lender/product dependant which is the greatest spread the Canadian Mortgage Sector has seen since 2011.