THE PARTY IS OVER, the Bank of Canada went where they haven’t been since 2009 by increasing rates 1/4%. 2017 saw two 1/4% increases and we may see more increases in 2018.
Here’s a recap of some of the news since the last rate announcement in December:
1) Inflation increased in Canada above 2%. November was the only month with inflation above the 2% target range but the Bank of Canada will continue to watch this number
2) Number of jobs created increased dramatically. When businesses are very productive they are hiring and that heats up the economy.
3) Higher debt levels of Canadians will mean that there will be more of an impact on their financial situation if rates increase further. This is not good for the economy but consumers continue to accumulate debt and spend.
4) New stress test mortgage rules were implemented January 1, 2018 are yet to be integrated into the housing market. These changes are expected to cool the housing market, recent rate increases will also have an impact.
5) NAFTA uncertainty is a worry for the economy. If this agreement is cancelled, this could have an impact on Canadian business growth and thus the economy of Canada
6) Global economies are on a roll and growing. Growth around the world is expected to keep our economy rolling
Here are some links to the interest rate discussions since the last rate announcement:
5 reasons why the Bank of Canada might not increase rates
Why the case for a rate hike isn’t airtight -Bloomberg
Gasoline fuels inflation above 2% – BNN
Bank of Canada leaves door open for more rate hikes – BNN
Today’s take on the rate increase – BNN
Many economists are predicting 2 or 3 rate increases this year so patience still may pay off in the long run if you decide to stay in a variable rate mortgage. Fixed rates have been increasing since the summer and most 5 year fixed rates are 3.09% to 3.49% depending on the lender.
Banks are expected to quickly increase the Prime rates by 1/4% to 3.45%.
Here is today’s announcement from the Bank of Canada:
The next Bank of Canada rate announcement is set for March 7, 2018.