Mortgage industry events, interest rate announcements, Canadian housing market index price numbers and other housing information, Market Insights reports, and much, much more. Maintaining our commitment to giving you MORE!

Is Another Bank of Canada Interest Rate Increase Coming in 2018?

The Bank of Canada interest rate is staying at 1% for the remainder of 2017, leaving many economists guessing what’s next for 2018.

On December 6, 2017, the Bank of Canada (BOC) announced the interest rate would hold at 1%. The rate was first increased in July of 2017 from 0.5% to 0.75%, and then raised again in September to 1%, but since then the BOC has taken a more cautious approach.

In its December 6 statement, the BOC said, “higher interest rates will likely be required over time.” However, it also said it remained “cautious.” The apparent paradox has left many experts confused as to what might come.

“We, like others, will have to watch upcoming data on October GDP and December employment to fine-tune forecasts for when the next hike comes,” Avery Shenfeld, chief economist at CIBC Capital Markets, said in a note after the announcement, according to Global News.

According to The Financial Post, Bank of Montreal chief economist Douglas Porter said that the Bank of Canada appears very patient, with little appetite to move in January despite the near-record low jobless rate.

“They will be minding NAFTA progress (or otherwise), any early impacts from the OSFI rule change at the start of 2018, and how Q4 growth, wages and prices shape up. We continue to have the March meeting circled for the next rate hike (with two more in H2 next year), but will be like the Bank in watching NAFTA and housing in particular.”

Statistics Canada reported on December 1 that gross domestic product grew at annual rate of 1.7% in the third quarter. The Bank of Canada had predicted the GDP to grow at an annual rate of 1.8%.

On the same day, Statistics Canada also reported that the national unemployment rate dropped to 5.9% in October, the lowest since early 2008.

The loonie fell slightly after the December 6 announcement, but remained high before that. Economists predict it will continue to stay strong.

The one outlier in an otherwise positive economic forecast so far has been the Canadian real estate market. In the December 6 BOC press release, only one mention was made about housing rates — that they continued to stay moderate. However, nothing was stated about incoming new Canadian mortgage rules (in effect January 1, 2018) that experts predict could have a big impact.

But according to The Globe and Mail, “…a cool down of the hottest housing markets in Toronto and Vancouver is exactly what the central bank wants in the face of record household debt. Canadians owe $1.68 for every dollar of disposable income.”

The next Bank of Canada interest rate announcement is scheduled for January 17, 2018. The BOC said it would “be guided by incoming data in assessing the economy’s sensitivity to interest rates, the evolution of economic capacity, and the dynamics of both wage growth and inflation.”

No matter what interest rate increases come in 2018, Purview has the tools for mortgage brokers to access up-to-date, comprehensive, accurate insights into the Canadian real estate market.

Call 1.877.787.8439 today or visit www.purview.ca.

 

« Back to Blog