Zoocasa
Real Estate Sold Prices
Calculator
Map
Property Trends & Insights
  • Blog Home
  • For Buyers
  • For Sellers
  • Real Estate News
  • Mortgage News in Canada
  • Free Guides (PDF)
  • Real Estate Infographics
  • Real Estate News
Zoocasa
Home Bank of Canada

Bank of Canada Holds May Rate – but Hike is on Horizon

Penelope Graham by Penelope Graham
May 30, 2018
in Bank of Canada, Real Estate News
2 min read
Bank of Canada holds May rate
Share10
Tweet
Share
10 Shares

It’s not a question of if, but when. The Bank of Canada held its trend-setting interest rate at 1.25 per cent today, where it has sat since January, but another hike is widely expected as soon as July.

With all economic factors looking up, the BoC strongly hinted it’s only a matter of time before it will need to tighten its monetary policy, despite lingering uncertainly around emerging markets and the status of NAFTA. A strengthening U.S economy, combined with higher-than-expected oil prices in April, continue to push domestic inflation close to its 2-per-cent target, a main impetus for rate hikes.

“Overall developments since April further reinforce Governing Council’s view that higher interest rates will be warranted to keep inflation near target,” the BoC stated in its May announcement.

Other economic factors, such as exports and business investment, have also performed well and in line with the forecast the BoC released in its April Monetary Policy Report.

BoC Forecasts Stronger Housing Market

While the housing market – a main economic contributor – remained soft in the second quarter of 2018 due to a combination of rising interest rates and new mortgage qualification requirements, the BoC predicts the downturn will be short-lived.

“Going forward, solid labour income growth supports the expectation that housing activity will pick up and consumption will continue to contribute importantly to growth in 2018,” it states.

These positive developments have economists in consensus that the BoC will increase its rate by another quarter of a per cent in its July 11 announcement, with another hike to come before the year is through.

What Does This Mean for Mortgage Borrowers?

The BoC’s Overnight Rate is used to set the Prime rate for consumer lenders, such as the Big Six banks, which in turn influences the cost of variable borrowing in Canada. This means those who have variable loans – including variable-rate mortgages and lines of credit – are directly impacted when the BoC changes its rate.

The outcome of today’s announcements means there will be no short-term change to monthly payments for variable mortgage holders – but the writing is on the wall. With strong expectation for at least two more hikes in the medium term, it’s important for borrowers to ensure they can absorb any upward movement to their monthly debt costs.

While fixed-rate mortgage borrowers will not be directly impacted by changes to the Overnight Lending Rate, any move made by the BoC eventually filters throughout the economy and impacts the overall cost of borrowing. For example, a rate hike next month will in turn impact the bond market and put upward pressure on yields, which in turn influence lenders to increase their fixed mortgage rates. This will have an impact on those coming up to renewal on their fixed-mortgage terms, and potentially for those renewing in the long-term, should a higher interest rate environment persist.

Related Read: Why Are Fixed and Variable Mortgage Rates on the Rise?

Previous Post

Toronto Neighbourhoods with the Shortest Days on Market [INFOGRAPHIC]

Next Post

Sunnier May GTA Home Sales Indicate Recovering Market: TREB

Penelope Graham

Penelope Graham

Penelope Graham is the Managing Editor at Zoocasa, and has over a decade of experience covering real estate, mortgage, and personal finance topics. Her commentary on the housing market is frequently featured on both national and local media outlets including BNN Bloomberg, CBC, The Toronto Star, National Post, and The Huffington Post. When not keeping an eye on Toronto's hot housing market, she can be found brunching in one of the city's many vibrant neighbourhoods, travelling abroad, or in the dance studio.

Related Posts

Canada

Sharp Housing Adjustment as Sales Continue to Drop: CREA

August 15, 2022
Buying a Home

Condo Apartments Remain the Most Affordable and Second Most In-Demand Property Type in Toronto and GTA: TRREB

August 4, 2022
Affordability

June 2022 Home Sales BELOW The 10-Year Average Across Canada: CREA

July 15, 2022

Blog Search

No Result
View All Result

Recent Articles

Sharp Housing Adjustment as Sales Continue to Drop: CREA

August 15, 2022

Hidden Gems for Sale in Markham under $700,000

August 12, 2022

Rent or Buy? Average Monthly Rental Prices vs. Monthly Mortgage Payments in the GTA

August 10, 2022

Should You Purchase a Home With an Open Floor Plan?

August 8, 2022

Sharp Housing Adjustment as Sales Continue to Drop: CREA

August 15, 2022

Hidden Gems for Sale in Markham under $700,000

August 12, 2022

Rent or Buy? Average Monthly Rental Prices vs. Monthly Mortgage Payments in the GTA

August 10, 2022

Should You Purchase a Home With an Open Floor Plan?

August 8, 2022

Condo Apartments Remain the Most Affordable and Second Most In-Demand Property Type in Toronto and GTA: TRREB

August 4, 2022

Your Home’s Screen Appeal: How to Stage Your Home for Photos and Videos

August 3, 2022

Newsletter Sign-up

Join a community of 130,000+ subscribers. Don't miss important real estate news, market data, and buying and selling tips.

Social Media

Featured Listings (Updated Weekly)

Hidden Gems for Sale in Markham under $700,000

August 12, 2022

The Most Expensive and Affordable Homes Sold in July in the GTA

July 29, 2022

The Most Viewed Homes in June 2022

July 22, 2022

Condos for Sale with Amenities in the GTA

July 11, 2022
first-time home buyer programs and rebates

About Zoocasa

Zoocasa.com is a full-service brokerage that offers advanced online search tools to empower Canadians with the data and expertise they need to make more successful real estate decisions.

Newsletter Sign-up

Join 130,000+ weekly subscribers. Don’t miss important real estate news, market data, and buying and selling tips: sign-up here.

Social Media

Zoocasa Tools

MLS Listings Canada
Search Sold Listings
iOS App
Android App
Find an Agent
Contact Us

  • Homes & Real Estate Properties
  • Terms of Use
  • Privacy Policy
  • Contact Us

© 2015 - 2022 Zoocasa Realty Inc., Brokerage

  • Blog Home
  • For Buyers
  • For Sellers
  • Real Estate News
  • Mortgage News in Canada
  • Free Guides (PDF)
  • Real Estate Infographics
  • Real Estate News
No Result
View All Result

© 2015 - 2022 Zoocasa Realty Inc., Brokerage