Bank of Canada Rate Announcement Oct 24
As expected, the Bank of Canada raised its target for the overnight rate to 1.75% today--which inevitably means variable mortgage rates, once again, are on their way up.
Citing a solid global economic outlook, reduced trade policy uncertainty (thanks to the new USMCA deal), as well as a Canadian economy operating close to potential, the Bank hinted this won’t be the last rate hike in the imminent future.
If the Bank’s forecasts are accurate, it’s probably right. It expects Real GDP growth to end up being about 2.1% this year and next, before slowing to 1.9% in 2020. At the same time, while inflation is on its way down--it dropped to 2.2% in September--the Bank believes rate hikes will be required to keep it around the ideal 2% target.
If there’s one silver lining, it’s that the Bank promises to keep an eye on how the economy is adjusting to higher rates--particularly in relation to household debt levels--before making any decisions to increase them again. In the meantime, if your mortgage is up for renewal and you’re wondering whether fixed or variable is your best bet--or if you’re in the market for a new mortgage and would like help understanding the mortgage climate right now--please don’t hesitate to drop me a line. I would love to help.
To read the Bank’s press release in its entirety, you can find it here: https://www.bankofcanada.ca/2018/10/fad-press-release-2018-10-24/