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Bank of Canada Overnight Rate Target Holds at 1.5% for September 2018

The Bank of Canada overnight rate target is staying at 1.5% for September 2018.

On September 5, 2018, the Bank of Canada (BOC) announced that it is holding its current interest rates for the time being. The last increase came in July of 2018, when rates went from 1.25% to 1.5%.

In the September announcement, the Bank outlined what economic factors influenced its decision to hold rates.

Consumer price index (CPI) inflation moved up to 3% in July. The BOC is expecting this to decrease to 2% by early 2019 — they predict that high gasoline prices will come down, which will in turn bring down the CPI inflation.

The Canadian mortgage market was taken into consideration, too. The BOC stated:

“Meanwhile, activity in the housing market is beginning to stabilize as households adjust to higher interest rates and changes in housing policies. Continuing gains in employment and labour income are helping to support consumption. As past interest rate increases work their way through the economy, credit growth has moderated and the household debt-to-income ratio is beginning to edge down.”

Indeed, a survey by Nanos Research reported that most Canadians are coping with the increased interest rates. Of the respondents, 53% said rising borrowing costs haven’t had a negative impact on their personal spending. Around 43% said they are feeling at least somewhat of a pinch. The remainder were unsure.

According to Statistics Canada, the household debt-to-income ratio is going down; it was at $1.68 for every dollar earned in June of 2018.

But there are still factors to watch out for. Better Dwelling reported that the effective weekly borrowing rate reached a seven-year high at the end of July 2018. And Equifax Canada has predicted that delinquency rates on non-mortgage consumer debts will increase modestly by the end of 2018.

The BOC also referenced trade policies, which they said don’t seem to be having an effect on business and exports as of yet but could in the future.

More interest rate increases will likely be ahead, the BOC said.

“Recent data reinforce Governing Council’s assessment that higher interest rates will be warranted to achieve the inflation target,” they stated in the September 5 release.

“We will continue to take a gradual approach, guided by incoming data.”

The next interest rate announcement is scheduled for October 24, 2018.

Purview has property tools you can rely on even as the Bank of Canada overnight rate changes. Make data-informed decisions that align with current mortgage interest rates.

Call 1-855-787-8439 or visit www.purview.ca to get started.

 

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