The Bank of Canada surprised most analysts today by cutting Canada’s 2013 growth estimate (to 2.0%) and calling the timing of the next rate hike “less imminent than previously anticipated.”
The BoC has used the “less imminent” wording before, but not in any recent rate decision statements. It attributed its position, in part, to “more muted inflation” and cooling household debt levels.
The decision leaves Canada’s prime rate stuck at 3.00% for the 27th straight month—to the delight of most variable-rate mortgage holders.
These were some highlights from today’s announcement:
- “Core inflation has softened by more than the Bank had expected…”
- “…global tail risks have diminished.”
- “Caution about high debt levels has begun to restrain household spending.”
- “…exports should remain below their pre-recession peak until the second half of 2014…”
- “…Some modest withdrawal of monetary policy stimulus will likely be required over time…”
The benchmark 5-year bond, which is closely correlated with fixed mortgage rates, fell 5 bps to 1.41% on the Bank’s decision.
Economists will now likely revise their rate hike calls (which have proven hopelessly non-predictive) to late 2013 or early 2014.
The next Bank of Canada Rate meeting is six weeks away on March 6.
One interesting side note: The Bank added that household debt growth has eased to just 3%. That’s the weakest annualized rate since 1999 and it reflects “a slowdown in the growth of both residential mortgage
and consumer credit.”
Canadians are both voluntarily heeding government debt warnings and being forced to heed them through stricter lending rules.
Chart source: Bank of Canada
Rob McLister, CMT
Last modified: April 28, 2014
I am happy that I am on variable mortgage till 2015.
I was fairly surprised when they seemed to indicate that rates would not be going up until next year. Happy though, and good to see that we’re starting to pay some real attention to our debt, whether we wanted to or not!
Me too…Prime – 0.70.
Jim
-.9 is better :)
The biggest concern for me is not whether or not we pay attention to our debt (which was a classic misdirection if I have ever seen one because Canadian households were never in fear of exceeding their capacity) is whether or not take home income will begin to increase in this country. Successive budgets from all levels of government have caused taxes to rise eroding the Canadian family’s earning power.
Average wages have been frozen at less than $40K annually since the late 1990’s yet taxes have increased by over 30% in the same period.
Let’s begin to address the real issues in this country – skyrocketing government spending, limited job growth and frozen income levels.
It is time to renew my mortgage -.75, Who did give you -.9. Now is hard to much up previous deals.
ditto here atul…i can thank the now defunct firstline for putting me onto it…r.i.p. firstline
I am P-0.85
-.9 was 17 months ago … nowhere to be found at this time
need some advice here please…..I have currently been offered a rate of 3.4% for the next 19 months (blended) through a port mortgage. Or i can pay a $2,500 fee, to buy out of remaining term, and sign up for 5 year fixed @ 2.99%?? What would you do?? Please help.
depend on your principal balance
i’m in the same stituation here
for 212000- every 1% is 10000 for 5 yrs
so 2000 for 1 yr, assume that you owe the same 19mths=1.5 yr
which is $3000 at 1%=100
3.4-2.99= 0.41%
about 2/5 of 3000 for 19mths
which is about $1300…so in 19mths if the rate don’t go up…you lose 1200…because you’d already pay 2500 up front, how ever if rate go up with in a year then you would save money.
you can try and get them to hold your rate for 120days with out signing any document then decide 2 month from now.
I cam up with this conclusion on my own, so i may still be wrong, find a very good broker, and talk to him/her see if they can draw you a picture.
If you’re refinance so that you can focus your engergy else where in life, it worth it, but if you’re doing this to save money then this don’t seem to be so good
best of luck
young huynh