Eight times a year, the Bank of Canada meets to determine what the base lending rate should be. Any change to this industry benchmark indicates a possible change to corresponding rates, such as interest rates for mortgages and additional types of consumer loans. This information is also a good indicator of the current status of the Canadian economy.
The Bank of Canada announced yesterday that the overnight lending rate will hold steady at 0.5 percent, unchanged since the 0.25 percent rate drop in July of 2015. The corresponding prime rate at Canadian lending institutions remains at 2.7 percent.
Along with the rate announcement, the Bank also released its final Monetary Policy Report of the year where a downgraded outlook for both exports and real estate was outlined. According to Governor Stephen Poloz, “the level of exports is well below where we thought it would be by now.” Real Estate activity is expected to weaken in response to the new legislation surrounding Canadian mortgages, which took effect on October 17, 2016. These changes will limit borrowing potential in an effort to cool the Toronto and Vancouver markets.
Projections for an economic rebound were also downgraded in comparison with July’s forecast, with the economy expected to return to full output by mid-2018 instead of late-2017. Estimated GDP for 2016 is down to 1.1 from the 1.3 percent forecasted in July, and down from 2.2 percent to 2.0 percent for 2017.
Although there were no changes to the overnight lending rate this month, Mr. Poloz acknowledged that a rate cut was “actively discussed” between himself and his top deputies before yesterday’s announcement.
The final rate announcement of the year will take place on December 7, 2016. For up-to-date information on interest rates and other mortgage news, be sure to follow us on Facebook or Twitter. If you have questions about your mortgage or what this information means for you, please feel free to contact our office and speak to one of our Mortgage Brokers today.