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No Change to Rates Today!



Bank of Canada keeps the overnight rate at 5%. Which for most lenders Prime rate will remain at 7.20%.

 

What is the Bank of Canada Overnight Rate?

The overnight rate is generally the interest rate that large banks use to borrow and lend from one another in the overnight market.


The Bank of Canada holds this Key Lending rate. They might lower it to encourage borrowing and spending OR they may increase it to curb inflation and debt levels.


Major lenders typically raise their prime rate when there is a hike. Thats the number they use to set interest rates for loans and mortgages.


Unlike a fixed rate where one is locked in to their rate, those in a variable rate will be affected by these changes. Home owners with fixed rate mortgages won't be affected until they have to renew.



Should I lock into a Fixed Rate now?

Historically variable rates have shown to save you more money in the long run.


A few things you should consider before locking into a Fixed rate is:

  • Are you planning to sell your home in the near future? Then we would highly recommend you stay in your variable rate mortgage.

  • Can your budget handle a payment increase if rates go up?

  • Will you be putting extra money down on your mortgage each month? If so, the savings from a variable rate can help you pay down your mortgage faster.


If you are considering locking in, give us a call to discuss first. We have a fun little calculator to help you forecast your savings if you decide to stay with your variable rate.



 

Whats to come??


Source: First National - one of Canada's largest non-bank mortgage lenders, offering both commercial mortgages and residential mortgage solutions.


Today, the Bank of Canada maintained its overnight benchmark interest rate at 5.0%, noting it remains concerned about the risks of inflation, even as the Consumer Price Index (CPI) came in at 2.9% in January. It also reiterated its pledge to continue its policy of quantitative tightening.


We summarize the Bank’s comments below. 


Canadian inflation

  • Shelter-price inflation remains elevated “and is the biggest contributor to inflation”

  • Underlying inflationary pressures persist: year-over-year and three-month measures of core inflation are in the 3% to 3.5% range, and the share of CPI components growing above 3% declined but is still above the historical average 


Canadian economic performance and employment

  • The Canadian economy grew in the fourth quarter by more than the BoC expected, “although the pace remained weak and below potential” 

  • Real GDP expanded by 1% after contracting 0.5% in the third quarter

  • Consumption was up a modest 1%, and final domestic demand contracted with a large decline in business investment 

  • A strong increase in exports boosted growth

  • Employment continues to grow more slowly than the population, and there are now some signs that wage pressures may be easing

  • Overall, the data point to “an economy in modest excess supply”

Global economic performance and bond yields

  • Global economic growth slowed in the fourth quarter of 2023 

  • U.S. GDP growth also slowed but remained “surprisingly robust and broad-based,” with solid contributions from consumption and exports

  • Euro area economic growth was flat at the end of the year after contracting in the third quarter

  • Inflation in the U.S. and the Euro area continued to ease

  • Bond yields have increased since January while corporate credit spreads have narrowed

  • Equity markets have risen sharply

  • Global oil prices are slightly higher than what was assumed in the January Monetary Policy Report (MPR)


Outlook

The Bank’s statement this month was relatively short and its forward-looking comments limited, except its observation that it expects inflation to “remain close to 3% during the first half of the year before gradually easing.” However, it noted that its Governing Council is still concerned about risks to the outlook for inflation, particularly “the persistence in underlying inflation.” Governing Council wants to see “further and sustained easing” in core inflation and said it continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour. 


Once again, the Bank repeated its mantra that it remains “resolute” in its commitment to restoring price stability for Canadians. So for the timing being, the policy rate will remain at 5.0% where it’s been since July of 2023.


Stay Tuned

Next Schedule Interest Rate announcements will be April 10th, 2024





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