For the 14th consecutive time, today the Bank of Canada announced that they will continue to maintain the overnight lending rate which holds steady at one per cent. This pleases variable rate mortgage and home equity line of credit consumers alike as there are no amendments to the bank’s prime lending rate and therefore no increases to their own mortgage rate and monthly mortgage payment.
Why No Change from the Bank of Canada?
Despite the overall state of the global economy, consumer confidence domestically has been well maintained. The turbulent European market has sent a ripple effect throughout the globe and has contributed to the uncertainty of the global economy. The U.S. on the other hand has started to move in the right direction. Although exports continue to be in demand, the strength of the Canadian dollar paired with the state of global economies has challenged an improvement in Canadian net exports.
Although Canada’s economic growth fell short of expectations in the first quarter, the momentum that has since been established is right on target. Housing activity has been driving the recovery in Canada, however the readily available cheap credit has continued to fuel household debt which hasn’t been supported by a similar increase in earnings.
What Should We Expect Next?
Experts are anticipating a steady overnight lending rate that will be maintained until the end of 2012. Any increase would need to be sustained on a global scale and until there is an improvement in the health of the global economy, no big changes will be made.