The Bank of Canada has lifted its key lending rate by 1/4 percentage point, to 0.75%. The bank said any further increases “would have to be weighed carefully against domestic and global economic developments.”
Meaning what? The BoC will now (more than likely) leave well enough alone for the foreseeable future. Although… we’ve heard that before. The next interest rate meeting is September 8th. Below is a chart of where we’ve been over the years. (Click on it for a bigger view)
Lowest rates of this beautiful day:
5yr Fixed @ 4.04%
3yr Variable @ 1.80% (Prime -.70%)
If you’re renewing, refinancing or purchasing… Call me NOW to hold these great rates!
I hope you’re enjoying a great summer so far!
Ever wondered where we stand in the grand scheme of things as far as Interest Rates are concerned?
Please enjoy the following: Historical Rate Charts – Fixed and Variable. (Please click on graphs to open in full-sized window)
(Courtesy of Firstline Mortgages – A Division of CIBC)
After more than a year at a record low level, Bank of Canada Governor Mark Carney raised the benchmark interest rate for the first time since 2007 by one-quarter percentage point to 0.5 per cent. This is the first time since 2007 that that rate has increased and the Bank of Canada is the first in the Group of Seven to do so since the financial crisis and recession began in 2008.
In a statement Carney emphasized that the increase should not be interpreted as just the first of more to come.
“This decision still leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in light of the significant excess supply in Canada, the strength of domestic spending and the uneven global recovery,” the central bank said. “Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.”
What does this mean for those with Variable Rate mortgages? If lenders raise prime rate by 1/4 point, as expected, homeowners with variable mortgage payments will see roughly $12 of monthly payment increase per $100,000 of mortgage. A little higher than record lows, but certainly still manageable.
On a positive note, the BoC also reassured Canadians in its statement. It said, “This decision still leaves considerable monetary stimulus in place.” Variable mortgage rates, for example, are still under 2%. That’s just a tick above their all-time bottom.
The new CMHC rules for self-employed (Business for self or BFS) borrowers take effect tomorrow and pose new challenges for this category of client.
First off, self-employed borrowers with more than three years in the same business who apply for a mortgage using stated income, as well as commissioned-income borrowers, are now required to provide to provide traditional proof of income (or “third party validation”) through regular income documents like financial statements, contracts and T4s.
Those who have recently become self-employed and don’t have third-party validation can still apply for a mortgage, but have to come up with a 10 per cent down payment instead of five per cent. Refinancing will also be cut to 85 per cent loan to value instead of the previous 90 per cent.
Please call to discuss.
Some experts are predicting Bank of Canada interest rate hikes are less than three months away after Statistics Canada reported core inflation jumped to 2.1 per cent in February. This compares to the central bank’s outlook of a 1.6 per cent average core inflation rate in the first quarter of 2010.
“We’re progressively leaving the recovery phase,” Yanick Desnoyers, assistant chief economist at National Bank Financial in Montreal told the Globe and Mail. He added policy makers “are going to change their tone on the economy in April, and they’re going to move in June. The longer they wait, the more aggressive they’ll have to be.”
Inflation wasn’t predicted to reach the Bank of Canada’s two per cent target until the third quarter of the year and some are saying the effect of the Olympic Games in Vancouver – which drove up costs, particularly in the hotel sector – caused the jump. The inflation numbers also contributed to a surge in the Canadian dollar, which hit a high of 99.38 cents U.S. on Friday.
“[This] report must be turning heads at the Bank of Canada,” economists Derek Holt and Karen Cordes Woods at Scotia Capital told the Financial Post. “While the details are mixed on the underlying components, it is pretty difficult to argue that emergency rates in Canada [of 0.25%] are still warranted.”
In contrast, the Post said economists at TD Securities don’t expect the Bank of Canada to over-react to the new number because “one-off factors” are well-identified.
The Bank of Canada kept it’s key interest rate unchanged today @ 0.25%. Interest rates have been held at that rate since April 2009, four per cent lower than they were back in January 2008. The last time the central bank raised the overnight rate was July 2007.
The next BoC rate meeting is April 20.
