Eight times a year the Bank of Canada (BoC) meets to determine what the base lending interest rate should be. Any change to this rate influences rates such as Mortgages and other customer loans. It also is a good indicator for the current Canadian economy.
Today the Bank of Canada announced a surprising update that they would drop its trend-setting overnight interest rates by 0.25% making the new rate 0.75%; a move that will benefit variable rate mortgage holders as well as in the interim benefit home buyer and investors.
In mid-2014, Canada appeared to be gaining momentum for a positive post-recession rebound – and a rate hike was anticipated. However due to the rapid decline in oil-prices, it has left a lot of unknowns for the economic growth in oil-exporting and its impact on the economic outlook for Canada. The Canadian dollar has dropped to its lowest level since 2009 and the inflation rate is predicted to dip to 1% – below the bank’s target range. The Bank of Canada’s decision comes to a shock for many as it was expected to maintain its rate, with most economists suspecting a rate increase in late 2015 or early 2016.
While business investment sectors are showing encouraging signs, and inflation rate is predicted to climb back up to 2% in the second half of the year, the rate decrease aims to provide security against risks posed by low oil to the country’s inflation and financial stability.
If you have questions about your mortgage or what this change in the overnight interest rate means for you, please feel free to contact our office and speak to one of our Mortgage Brokers today.