Up, down or nowhere at all. Once again, we are approaching another Interest Rate announcement by the Bank of Canada- this coming Tuesday, April 12.
While we have no crystal ball, there are a number of factors present from which we can draw speculative expectation. The problem is that some of them are contradictory- and while in the past, some of these predicators could have meant a sure bet in any direction, the situation in which the Canadian economy is not typical.
The rising loonie and inflation remaining steady at 1.5% both suggest that now is not the time for a rate hike. In fact, many analysts are now predicting that it will be summer before we see a rise in rates.
Also, we find ourselves right in the middle of a Federal Election campaign. If history is any guide, rates will remain unchanged, as the country technically is in a state of political instability- and the BOC has traditionally stepped into a less active role when Canadians are preparing to head to the polls.
On the other hand, last week, many of the major banks raised some mortgage rates marginally- which is typically done in advance of an anticipated rate hike.
It’s about striking a balance- but the question is, in this push and pull of fine tuning the economy as it makes its way back to solid ground , how much is too much—and what does sitting still again suggest?.
On Tuesday morning, all eyes will turn to Mark Carney to see in which direction we will be heading. There are a few things that are different in the Canadian landscape as we await this particular announcement: Since the last announcement, Jim Flaherty’s proposed mortgage changes intended to tighten policy were introduced on March 18. There has been concern raised by many that the combination of these new restrictions with the eventual rise in interest rates will have a significant impact on affordability- and that some might get squeezed out of the market.
Propertywire.ca has talked to a group of Mortgage and Real Estate Professionals to gauge what the word is on the street.
Edmonton area Realtor Tara Kennedy, All Banners Realty, is hopeful that status quo will be held because of the possible impact on business:” My hope is that interest rates remain as they are. It would spark a few people to stop sitting on the fence regarding their purchase if it is announced that interest rates will be going up. Because, I believe if the rates rise, we may see a drop off in activity, but I do hope they remain as is for now to ensure there is continued momentum on home purchases.“
Larry Matthews, AMP DAC, and President/Broker with Halifax area Hants Realty Limited believes that a slight rate hike is on the table tomorrow: “I believe most of the major banks have raised their 5 year mortgage rates a bit which is probably a forerunner or good indication of what the Bank of Canada will do. Most of Canada's economic indicators are looking pretty good so I can see a rate hike but a modest one”
“There are many sectors of the economy still struggling especially in those industries that export. With the Canadian dollar being so high, their ability to compete has been undermined. I'm sure the Bank of Canada is sensitive to that and any rate hike will be modest at best. In relation to the real estate market higher rates will prompt those buyers pre-approved at a lower rate to get out and buy a house so a modest rate increase will probably increase demand for housing over the next few months.”
Adam Hawryluk Mortgage Consultant, INVIS Mortgages on Vancouver Island agrees with current analyst predictions, citing inflation and the loonie as reasons to stay still, “I would say that Bank of Canada won't be rising interest rates this coming Tuesday. This is going to be due to lower than targeted inflation rates and a strong Canadian dollar.”
As Hawryluk suggests, it has now come down to case of it, but when: “But they WILL go up, it’s just a matter of time.”
Watch Propertywire.ca full coverage of the Bank of Canada’s interest rate announcement.
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