The Bank of Canada made a decision to keep the prime lending rate as it is for now, but removed the guarantee that mortgage rates will stay low through to July. This is a strong indication that the Bank of Canada will increase their prime rate by at least 0.25% at the next update in June.
This resulted in the value of the Canadian dollar increasing in value against the US dollar by 1.5 cents yesterday. Bond markets have been increasing in anticipation of the Bank of Canada increase, and as a result fixed rate mortgages have already increased significantly in the past 2 weeks.
One interesting note in this article that is lost in the headlines was this section:
Even so, economists that favoured a rate hike said the bank can only get so far ahead of the Fed. They note the Canadian bank has flown solo twice before in the past two decades, only to have to subsequently pull back.
“The need for emergency rates have passed but we still have a need for low rates,” Holt explained.
This means that in the past 20 years…the Bank of Canada has only made a decision independent of the US Federal Reserve TWO times! And both times, they have had to backtrack! With this history in mind, it is very difficult to see the urgency to lock into a fixed rate, especially now that fixed mortgage rates have increased so dramatically in such a short period of time. This is in line with what I had stated previously about variable mortgage rates.
For new buyers, its going to be difficult for many people to get a variable mortgage rate in the Vancouver area thanks to your friends at the Government of Canada changing lending policies that took effect April 19th. For the foreseeable future, average folk don’t get variable rate mortgages…only the wealthy who can put 20% down or have enough income to qualify for their required variable mortgage using a 6% interest rate will be eligible.
From all indications, the US economy is still struggling mightily. It does not appear that the Fed will be increasing their rate any time soon. Enjoy the low rates while they are here! Fill in the form below and let’s get started on holding you a low mortgage rate.