The Bank of Canada announced yesterday that it’s keeping its target for the overnight rate at 1% which will in turn maintain the variable mortgage prime rate at 3.0%. This announcement comes with no surprise and was expected by every mainstream economist weighing in on the issue.
The much anticipated upward pressure on interest rates has not materialized and is no longer on the radar. Recent revelations of economic slowdowns in China, Europe and the US have rekindled fears that a new recession may soon be on the horizon. Should that be the case then the current monetary stimulus may not be enough and further rate decreases may be necessary to keep our dollar in check and our domestic economy afloat.
Although mortgage holders and industry participants love to hear that mortgage rates are staying low, this is not good news. The low mortgage rates have already helped drive spending and investment to the best of its ability. In order to keep the real estate sector sound we now need job growth and rising incomes. While a growing labour force would necessitate ratcheting up mortgage rates, the positives would far outweigh the negatives when it comes to our standard of living and our wealth.