Fresh interest rate increase by Bank of Canada announced today
The Bank of Canada stepped forward with another interest rate increase, and signalled that more rate hikes are likely coming.
The overnight benchmark rate increased by a quarter point on Wednesday, the third-rate increase in 2018. Currently the rate is at 1.75 per cent. As governor Stephen Poloz and his deputies on the Governing Counsel stated, now that the trade agreement issue has stabilized, the outlook on the Canadian economy is much better. Home owners are adjusting to increased borrowing costs and the economy seems to be less dependant on the housing market and debt-based spending.
Bank of Canada (BoC) kept its interest rate at record lows for years, in order to stimulate the economy after the downslide of 2008. In their most recent statement, BoC representatives announced that the economy looks very stable and will no longer need such stimulus. Experts take this as a hint to more rate hikes coming in the near future.
More hikes to expect?
The bank expressed a lot of optimism about the successful re-negotiation of NAFTA deal and the expanding economy. When BoC announced the new interest rate increase, they dropped the word “gradual” from the description of future plans for rate changes. This detail did not go unnoticed. Experts from all over Canada interpreted this change as indication for more frequent rate hikes.
Experts at the Bank of Nova Scotia said that the Bank’s tone suggests another interest rate increase as soon as December of this year. Furthermore, 23 economists surveyed by Bloomberg all predicted another hike coming up. Just to remind, the October interest rate increase is the fifth increase in the past year, which is concerning to many Canadians.
“In determining the appropriate pace of rate increases, [we] will continue to take into account how the economy is adjusting to higher interest rates, given the elevated level of household debt,” stated Bank of Canada. “In addition, we will pay close attention to global trade policy developments and their implications for the inflation outlook.”
Who will be affected the most?
The interest rate increase is big news for anyone with a variable mortgage to pay off, but those with fixed rates won’t feel it until next renewal. Those who were following out blogs, know that we were predicting this over the past few months and advised a lot of our clients to switch to a fixed rate term or more discounted variable rate. We expect another 0.5 – 0.75% increase next year so renewing your mortgage or fixing in for a long term could be a really good option.
Also, if you got your variable rate mortgage 1 – 2 years ago, there is a LARGE chance that we can reduce your rate at minimum cost to you.
For any questions don’t hesitate to contact us Contact us directly.