Eight times per 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 has decided to keep its benchmark interest rate steady at 1 per cent following two straight hikes earlier this year. Officially known as the target for the overnight rate, the Bank’s rate has a large impact on the rates that lenders offer consumers on products such as mortgages, savings accounts and other types of consumer loans.
Since the Bank’s increases in July and September, economic indicators have been more subdued which helps to explain the cautious tone in today’s announcement. The central Bank held off increases at this time because it expects the recent strength of the Canadian dollar to slow the rise in the pace of inflation. It also suggested that future increases are still likely, albeit at a more gradual pace.
Updated projections predict economic growth to moderate after a surprisingly powerful performance in recent quarters, as housing- and consumer-related contributions start to decline.
Governing Council will be cautious in making future adjustments to the policy rate. In particular, the Bank will be guided by incoming data to assess the sensitivity of the economy to interest rates, the evolution of economic capacity, and the dynamics of both wage growth and inflation.
Should I expect any changes to the prime rate on my mortgage?
Increases to the prime rate offered by your lending institution can occur at its own discretion - however, since the Bank of Canada’s rate has remained unchanged, there are no changes to the cost of lending. This usually means that prime rates will remain the same for the time being.
When - if at all - Should I Lock into a Fixed Rate?
This is heavily dependent on the specifics of your mortgage, and we encourage you to speak with your Broker to discuss the right direction moving forward for your particular situation. Some of the factors to consider include:
- What your current variable rate is
- How much time is left on your mortgage term; and
- What fixed rates are currently being offered
The next rate announcement will take place on December 6, 2017.
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.