1% cash back

Bank of Canada maintains overnight rate at 1%

In a relatively unsurprising announcement, the Bank of Canada has indicated that it will maintain it’s current overnight rate of 1%, which maintains the low cost of borrowing.

Specifically, there were 3 factors which contribute to this announcement:

1. Inflation

Inflation has relatively remained under control as the Bank of Canada reported that it is at the anticipated 2%. This low rate of inflation means that a hike in interest rates is not necessary to make up for rising prices.

2. Global Economy

The European economic recovery has faced and continues to face many challenges with factors such as the Ukraine-Russia conflict weighing it down in terms of trade sanctions. A low interest rate is needed to continue to stabilize global and Canadian financial markets.

3. Canadian Exports

This past quarter resulted in a high number of exports with the Canadian dollar depreciating, and US economy strengthening. A hike in interest rates at this time would dampen the export outlook after posting solid results.

What does this mean for housing?

A low cost of borrowing means affordable mortgage rates for homebuyers. As mentioned in an earlier piece on RealtyForSale.ca, it is vital for the Bank of Canada to maintain the interest rate at an affordable pace in line with homeowner affordability and expectation. Otherwise, the market could soon become unaffordable.

Share

You may also like...