It seems variable mortgage rates will be standing pat, for now, as the Bank of Canada announced today it will be keeping the target for the overnight rate as-is, at 1.25%. How this relates to your variable rate mortgage or line of credit is a consumer prime lending rate of 3.45% for most banks.
The reason for the non-move, according to the Bank, is that inflation is still within the safe zone, sitting at 2%. Additionally, while the outlook for the global economy and, more specifically, the US is looking better-than-expected, first-quarter GDP growth in Canada was weaker than anticipated.
Part of this slow GDP growth is a result of housing markets. It seems the new mortgage guidelines had their desired effect and resulted in slow home sales across the country in the first quarter. The Bank doesn’t anticipate things will remain this slow for long, however, as it expects some of the weakness will be “unwound” as 2018 progresses.
Ultimately, the Bank believes foreign demand in Canadian exports will increase later in the year, along with business investment. It also anticipates the labour market will continue to strengthen. As that happens, GDP growth will likely pick up-which means interest rates will probably increase along with it in the not-too-distant future.
If you have a variable rate mortgage-or if your mortgage is up for renewal this year, future hikes likely will affect you. To find out how much-and what you can do to ease the burden a bit-please drop me a line.