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.
For the first time in six months, The Bank of Canada decided today to raise its benchmark interest rate from 1.25 percent to 1.50 percent as expected. The rate, which sets the trend for rates on mortgages and other loans, has not been this high since December 2008.
The Bank of Canada is now predicting slightly stronger growth for Canada over the next couple of years, according to updated projections it released today in its quarterly monetary policy report.
The country’s inflation rate is expected to rise 2.5 percent, above the two percent midpoint of the bank’s target range, due to temporary factors such as higher gas prices, before going back down to two percent in the second half of 2019.
In terms of the future, the Bank predicts Canadian growth will continue to see larger contributions from exports and business investment, which were both stronger than expected in the first three months of the year.
Leading up to the announcement today, there was expectations to raise the interest rate following a run of healthy economic numbers, including the Bank of Canada’s own survey on business sentiment, tightened job markets and growth in wages.
Moving forward, the Bank said it expects higher interest rates will be necessary over time to keep inflation near its target, however, it intends to continue along a gradual, data-dependent approach.
What does this mean for my variable-rate mortgage?
Because the cost of borrowing will be more expensive moving forward, you can expect Canadian lending institutions to increase their respective prime rates within the next few days. This means that you will soon see an increase in your mortgage payments. If you have questions regarding the specifics of your mortgage and how much your payments will be moving forward, click here to email your Broker.
Is now a good time to switch to a fixed interest rate?
Because every financial situation is different, a free consultation with your Broker is the absolute best way help you determine whether locking in at a fixed rate would be beneficial for you. 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 September 5th, 2018.
For up-to-date information on interest rates and other mortgage news, be sure to follow Innovative Mortgage Solutions 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!