Although the recent CMHC changes aren’t news to many (I hope) and I feel like I’m starting to sound like a broken record… a survey conducted by BMO found that a whopping 49 per cent of Canadians are not familiar with the new mortgage rules that came into play this past Monday! This leads me to believe that 49 per cent of Canadians live under a rock, mortgage free and without cable. If you are one of the 49 per cent, please check out the new rules and help tip the “in the know” side of the scale.
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 means no increases to mortgage rates and monthly mortgage payments for variable rate mortgage holders and home equity line of credit consumers.
A survey found that 43 per cent of Canadian homeowners would be in a bind if interest rates were to increase. 4 out of 10 claimed they would feel pressure if rates would rise as little as two per cent while 1 out of 5 said the same two per cent increase would hurt their ability to service their mortgage. Only 57 per cent felt that their mortgages would still be affordable if mortgage rates increase. But how likely is a 2 per cent increase in mortgage rates?
The Bank of Canada announced this morning that interest rates will remain unchanged for the 11th consecutive time over the past 15 months. The last time the BOC made a change to the overnight lending rate was in September 2010 with a moderate increase of 0.25 per cent. The news is really no news at all, given that nearly all industry professionals and top economists were anticipating no change. But what should be of interest to consumers is the justification behind the decision. Here’s why the Bank of Canada is keeping interest rates where they are.
Canadian consumers could see lower fixed mortgage rates this month as competition heats up and lenders look to build their mortgage pipeline for the year, says RateSupermarket.ca’s Mortgage Rate Outlook Panel for January 2012. Lenders are eager to get a good start to the new year and build up their fixed mortgage rate client base, which means fixed rates could decrease as competition picks up. Variable mortgage rates, on the other hand, are expected to remain level.
If you’ve been carrying a variable rate mortgage, 2011 has been a great year for you. The Bank of Canada held their target for the overnight rate at 1% all year long and subsequently none of the major banks change their prime rates, currently steady at 3%. This resulted in no change to monthly payments for variable mortgage holders, and those of you on Prime – 1% are very lucky!
Variable mortgage holders can rest easy knowing that their mortgage payments are not expected to increase any time soon. Once again the Bank of Canada announced that they will leave the target overnight lending rate constant at 1%. This means that Prime rates will also stay the same and therefore variable mortgage rates. The Bank of Canada stated the following reasons for holding the course:
Surprise! The Bank of Canada kept their target for the overnight rate at its current level of 1%, the 9th straight time it’s done so since the last increase on September 2010. Well, let’s be honest, it really wasn’t a surprise, the decision was widely expected by industry experts. The supporting commentary on the global and national outlook was more important this time around as the markets and economists were waiting to hear the Bank of Canada’s outlook on growth.
The Bank of Canada met this morning and as many experts predicted, including our Mortgage Rate Outlook Panel members, the key overnight lending rate will stay where it is at 1%. This means that the Prime Rate is also unchanged at 3%, and that variable mortgage rate holders don’t have to worry about payment increases just yet.
The interest rate announcement earlier today confirmed what many were expecting, the Bank of Canada will maintain the key overnight lending rate. The overnight rate continues to sit at 1 per cent, the Bank Rate is 1 1/4 per cent and the deposit rate is 3/4 per cent. This announcement mirrors the thoughts of our Mortgage Rate Outlook Panel and means that variable mortgage rates will remain unchanged.