Archive for the 'Bank of Canada rate announcement' Category

Good news for those who have resolved to buy a house in 2019: the Bank of Canada overnight rate is staying the same for now.

On January 9, 2019, the Bank of Canada (BOC) announced that the overnight interest rate would stay at 1.75% (the rate set in October of 2018) for the time being.

Part of the reason for the hold was Canadian housing investment.

“…consumption spending and housing investment have been weaker than expected as housing markets adjust to municipal and provincial measures, changes to mortgage guidelines, and higher interest rates,” the BOC stated in a release.

“Household spending will be dampened further by slow growth in oil-producing provinces. The Bank will continue to monitor these adjustments.”

Between mortgage guidelines introduced in January 2018, interest rates increasing from 0.5% of 1.75% from July of 2017 to now, and other measures, such as the foreign buyers’ tax, the Canadian housing market has been slowing down.

But it’s not just the real estate market. With higher interest rates and less disposable income to spend, consumers are spending less on non-essential goods. While there are other factors that drive the economy, the drop in consumer spending is having an effect.

The real estate market wasn’t the only reason for the BOC’s decision. Two other factors were the global economic outlook – particularly the U.S.-China trade conflict — and global oil prices. The BOC has said it will continue to monitor these items.

Interest rate increases have been predicted to slow down in 2019, but the BOC doesn’t think they’ll stop altogether.

“Weighing all of these factors, Governing Council continues to judge that the policy interest rate will need to rise over time into a neutral range to achieve the inflation target,” the BOC stated.

“The appropriate pace of rate increases will depend on how the outlook evolves, with a particular focus on developments in oil markets, the Canadian housing market, and global trade policy.”

The next Bank of Canada interest rate announcement is scheduled for March 6, 2019. View the full text of the BOC’s January 9 decision here: https://www.bankofcanada.ca/2019/01/fad-press-release-2019-01-09/.

No matter what changes with interest rates, or the Canadian real estate market, GeoWarehouse has tools that can help. Our property information enables you to stay on top of a changing market.

Contact us today to learn more about becoming a subscriber. Call 1-866-237-5937 or visit www.geowarehouse.ca.

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The Bank of Canada interest rate is staying at 1.75% for the remainder of 2018.

On December 5, 2018, the Bank of Canada (BOC) announced that it would hold the overnight rate at the amount set on October 24, 2018 of 1.75%. The Bank Rate is correspondingly 2% and the deposit rate is 1.5%.

In its decision, the BOC referenced household credit and regional housing markets, saying that both “appear to be stabilizing following a significant slowdown in recent quarters.”

“The Bank continues to monitor the impact on both builders and buyers of tighter mortgage rules, regional housing policy changes, and higher interest rates,” the BOC stated in a release.

However, the regional housing market wasn’t the biggest factor in the Dec. 5 decision.

Oil prices have fallen sharply since the October announcement and benchmarks for western Canadian oil have been further pulled down by transportation constraints and a buildup of inventories. The BOC has said they will be keeping an eye on this economic factor moving forward.

Trade conflicts are also facing uncertainty.

Moving forward, the BOC will be keeping an eye on these factors, plus Canadian household debt and housing levels. They still indicate that further hikes will likely be coming.

For those in the real estate market, this could indicate a reprieve. If clients are shopping for a new home, or you are considering buying a property for investment purposes, interest rates are still at a relatively low level. That could be changing in 2019. Economists are widely predicting that the Canadian interest rate could reach at least 2.5% in the next 12 months.

This hold might mean encouraging clients to deal with outstanding household debt now, or access home equity while they can. As the gross debt service (GDS) ratio — total amount of housing-related debt — and total debt service (TDS) ratio — total amount of all debt — are now weighed more heavily by mortgage lenders, it’s a good idea to get those levels as low as possible before applying for mortgage funding.

The next BOC announcement is scheduled for January 9, 2019.

GeoWarehouse has real estate tools to help find opportunities even with a rising Canadian interest rate. Access our property search, sales comparables, demographics reports, and more all at www.geowarehouse.ca.

Call 1-866-237-5937 to find out how to become a subscriber.

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October 24, 2018

The Bank of Canada overnight rate has gone up to 1.75% after an October 24, 2018 announcement.

This is the fifth interest rate increase since July of 2017, and the third in 2018.

The Bank of Canada (BOC) cited robust U.S. and Canadian economies and the new US-Mexico-Canada Agreement (USMCA) as some of its reasons for the increase.

Other justifications included business investment and export projections, a stable inflation rate, and steady household spending.

There was only one mention of the Canadian housing market in the announcement.

“Households are adjusting their spending as expected in response to higher interest rates and housing market policies,” the BOC stated.

“In this context, household credit growth continues to moderate and housing activity across Canada is stabilizing. As a result, household vulnerabilities are edging lower in a number of respects, although they remain elevated.”

The October 24 rate increase was expected by many, especially once the USMCA deal was approved.

The BOC indicated there will be more increases on the horizon, though perhaps not as many as originally thought.

“In determining the appropriate pace of rate increases, Governing Council will continue to take into account how the economy is adjusting to higher interest rates, given the elevated level of household debt,” the BOC said.

There is one more interest rate announcement scheduled for 2018, on December 5.

The effects of the hike on real estate interest rates remain to be seen.

GeoWarehouse has tools for real estate professionals that can help navigate interest rate changes. Research the latest property data, comparable sales, and more.

Call 1-866-237-5937 or visit www.geowarehouse.ca to learn more.

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The Bank of Canada (BOC) interest rate is remaining at 1.5% for September of 2018.

The BOC increased interest rates from 1.25% to 1.5% in July of 2018 — the fourth increase in a year. On September 5, 2018, the BOC announced that interest rates would stay at 1.5% for now.

High cost of consumer price index inflation due to gasoline prices, the U.S. economy, and uncertain trade policies all influenced the BOC’s decision — as did the Canadian real estate market.

“Meanwhile, activity in the housing market is beginning to stabilize as households adjust to higher interest rates and changes in housing policies,” the BOC said in the September 5 announcement.

“Continuing gains in employment and labour income are helping to support consumption. As past interest rate increases work their way through the economy, credit growth has moderated and the household debt-to-income ratio is beginning to edge down.”

The Teranet-National Bank House Price Index has seen some stabilization over the summer months, although that stabilization has largely been seasonal.

The new mortgage stress test for uninsured mortgages, introduced on January 1, 2018, appears to have affected the market. Mortgage Professionals Canada “Report on the Housing and Mortgage Market in Canada” for July 2018 stated that an estimated 100,000 Canadians have been prevented from buying a home as result of stress testing.

Statistics Canada reported that the Canadian household debt-to-income ratio decreased to $1.68 for every $1 earned as of June 2018, although that figure is still higher than it was a year earlier.

The BOC said in the September 5 announcement that interest rates will continue to increase gradually. Many economists are predicting at least one more hike in 2018 — likely in October.

The next interest rate announcement is scheduled for October 24, 2018.

The property data tools from GeoWarehouse can help real estate professionals adapt to changing housing interest rates and more. Contact us today. Call 1-866-237-5937 or visit www.geowarehouse.ca.

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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.

Visit www.geowarehouse.ca or call 1-866-237-5937 to get started.

 

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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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