Canadian macro-economists are mostly in agreement that the overnight rate should go nowhere in the next 9-12+ months. And the Bank of Canada gave no indication today that such projections are off the mark.
The Bank left Canada’s core lending rate unchanged at 1% for the 29th straight month, with no change in sight.
Part of the Bank’s reasoning is reflected in these comments from its statement:
- “Total CPI inflation has been somewhat more subdued than projected in the January MPR as a result of weaker core inflation and lower mortgage interest costs…”
- “The Bank expects…the debt-to-income ratio [to stabilize] near current levels.”
- “…Residential investment is expected to decline further from historically high levels.”
- “With continued slack in the Canadian economy, the muted outlook for inflation, and the more constructive evolution of imbalances in the household sector, the considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required, consistent with achieving the 2 per cent inflation target.”
For an excellent deciphering of the Bank’s press release, click here.
Today’s announcement shed little new light on the timing of the next prime rate change. Of course the BoC is still suggesting that the next rate move is up, but others, like David Madani of Capital Economics, aren’t so sure.
On Sunday, Madani said the “inevitable” rate hikes that so many predict could actually be pre-empted by policy loosening. He noted:
“Given the recent spat of weak economic data, below target range inflation and the presumably widening output gap, the market’s ruling out of interest rate cuts makes little sense.”
For now, as long as the 5-year bond yield stays under or within the psychological 1.50% to 1.60% range, there’s little danger of any notable rise in rates. After this morning’s rate announcement, bond yields remained flat at 1.32%.
The next BoC rate meeting is April 17.
Rob McLister, CMT
I am not sure whom to believe anymore. All these different analysts really have no clue. A rate hike will happen when rate hike will happen, next month, next year, or next decade. All I know is all these years and prob going forward a variable would have been the cheapest way to go.
I just got a 5 year fixed for 2.79%. You’d have to be a born gambler to turn that down for a 2.50% variable.
How about 2.2%…that’s where we’ve sat for 2.5 years now…
I’ve got in a 5-yr prime -70 variable with First National that has 2 1/2 years to go & am staying put for now; I also have to say that their 10-year fixed at 3.69% is looking attractive & I may pull the trigger on it if things start to go south…
Jim
Hi can you tell us where you got this amazing rate?
Thanks.
I am trying to decide if I should ride out my Prime minus .75%(2.25%) which is up at the end of May 2014 or locking in while the going is good on the 5 year and 7 year rates. Any advice would be appreciated greatly.
Thanks,
Doug
2.15% since sept 2011 (5 year term). 3.5 years to go…
The European Central Bank is following along as they left their rate at .75% today.
Never take a 7 year. The extra you’ll pay is a complete waste of money. If you have to go long term, take a 10 year instead for almost the same price.
Just from the comments, there’s gonna be lots of pain if we get rates back at around 7 percent!
Doug;
My recommendation is to go withn 5 yrs because , as said earlier , the rate will be more for 7 yrs v/s 5 yr and also for any reason if you break the mortgage , panelty will be more..
Ya, where did you get a 2.79 5 year fixed?
My advice is – enjoy your low rate.
Take some rate holds once in a while from the banks in case you’re afraid rates will go high.
My opinion is that rates will stay low for longer than what “the analysts” predict
Who’s the mortgage with??
I think people are coming to a realization that the NEW norm is lower rates. This is based on what is happening around the world. Canada won’t move until the USA does so just sit back and enjoy the low rates. Even when they do move up, it won’t move far. Our 2.35% variable is looking really good. We still have 3 years left on it.
Interest Rates Predictions are rarely clear. Variable may have been the cheapest way to go but the best thing we can probably do now is put more money towards the principle while interest rates stay low.