Archive for the 'Bank of Canada rate announcement' Category

On July 11, 2018, Canadian housing interest rates rose for the fourth time in a year, going up to 1.5%.

The Bank of Canada interest rate increases began in July of 2017, going from 0.5% to 0.75%. From there, they went to 1% in September of 2018, and 1.25% in January of 2018. The July 11, 2018 announcement is the most recent increase.

Higher interest rates mean that Canadians will have to pay more on outstanding, unsecured debts, including credit cards, unsecured lines of credit, and variable-rate mortgages.

This could also affect potential homeowners as mortgage lenders have to stress test mortgages against current interest rates following the introduction of B-20 guidelines in January of 2018.

Lenders are encouraged to look at the gross debt service ratio (GDS), meaning the percentage of a person’s household-related debt, and the total debt service ratio (TDS), meaning the percentage of a person’s total debt, rather than using only the loan-to-value ratio of a potential property purchase.

The Bank of Canada (BOC) has been hinting for months that more interest rate hikes were on the horizon, and this month it came to fruition.

The BOC referenced several reasons for the increase in its statement, including the Canadian housing market.

“Canada’s economy continues to operate close to its capacity and the composition of growth is shifting,” the BOC stated.

In past years, the Canadian economy depended on lower interest rates to stay afloat — household spending and the Canadian real estate market were both big economic drivers. But recently that makeup has changed and those items are not as critical. Instead, exports, business investments, and the like are becoming the economic strongholds.

As a result, the BOC is now trying to curb the high level of Canadian household debt through higher interest rates. They also cited recent data “suggesting housing markets are beginning to stabilize following a weak start to 2018” .

More interest rate increases are expected to come but will take a gradual approach. The BOC will be monitoring incoming data, the impact of higher interest rates, capacity and wage pressures, and trade actions.

According to Bloomberg, investors are anticipating additional hikes every six months or so until the benchmark rate settles around 2 or 2.25% by the end of 2019.

The next BOC announcement is scheduled for September 5, 2018.

GeoWarehouse can help you navigate Bank of Canada interest rate impacts to the Canadian housing market. Our tools help make you a property expert, so you can find new real estate leads, assess neighbourhood demographics, compare sales, and more.

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The next Bank of Canada rate announcement is coming up quickly, on March 7, 2018, and many Canadians are wondering whether it means interest rates increasing again.

For the past nine months, much speculation has circled around the Bank of Canada interest rate, ever since it began increasing in July of 2017 from 0.5% to 0.75%. Since then, it has increased twice more — once in September of 2017, going up to 1%, and again on January 18, 2018, going up to 1.25%.

During the January Bank of Canada rate announcement, officials said interest rates would likely be increasing even more in 2018. So, will we see another hike on March 7?

Since the January announcement, economic experts have been debating that very question — and so far the consensus is that while we likely won’t see interest rates increasing in March, it won’t be long before they do rise again.

Canada’s Parliamentary Budget Officer predicts the next interest rate increase will come in April.

“We continue to expect that the Bank of Canada will again raise its policy interest rate by 25 basis points in April,” the PBO said in the latest Economic and Fiscal Monitor report.

The PBO isn’t the only one making the prediction that interest rates will increase again — at least once this year — but other experts aren’t quite agreeing on when it will happen. While the Bank did say that further interest rate increases are likely in the forecast, the Governing Council also said that it would approach any further hikes with caution.

According to the CBC, markets currently aren’t predicting an interest rate increase in March, with only a 27.7 per cent probability of a boost. The CBC says interest rates are more likely to increase again closer to the end of 2018.

Bank of Canada governor Stephen Poloz has said that he doesn’t know when interest rates will increase again, as the answer is influenced by so many factors.

“…we’ve explained to people that there are a number of important issues that force us to not be mechanical or to use a rule or to plan ahead in that way,” Poloz told CNCB.

“We’ve said we are totally data dependent.”

In the same interview, Poloz also made mention of Canada’s high level of consumer debt and said that he felt the economy would be “more sensitive to higher interest rates than in the past.”

When the Bank of Canada increases interest rates again is also dependent on NAFTA, the North American Free Trade Agreement. U.S. President Donald Trump has threatened to withdraw from NAFTA, which would significantly alter the trade deal and Canada’s economy.

As of right now, it seems unlikely that we’ll see interest rates increasing in March, but so much can change so quickly it’s, of course, impossible to say for sure.

GeoWarehouse tools can help you stay on top of your game no matter what Bank of Canada rate announcements come our way. Our state-of-the-art mapping, research tools, and professional reports make you the expert. Learn more at www.geowarehouse.ca.

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