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

Interest Rates Stay Steady At 1.75% in BoC July Announcement

Penelope Graham by Penelope Graham
July 10, 2019
in Bank of Canada
3 min read
BoC July Announcement
Share20
Tweet
Share
20 Shares


The Bank of Canada (BoC) ushered in another season of stability for interest rates as it held its trend-setting Overnight Lending Rate at 1.75%, where it has remained since October of last year, in its July announcement.

While the economy has been stabilizing and strengthening on the home front, global growth has been considerably slower as trade tensions between the U.S. and China have taken a bite out of global GDP. As a result, central banks around the world, including the U.S. Federal Reserve and European Central Bank, have been on a rate-cutting mandate. Thus far, Canada has bucked that trend by keeping its cost of borrowing at status quo, though it acknowledges that “escalation of trade conflicts remains the biggest downside to the global and Canadian outlooks.”

It reports the Canadian economy is “returning to growth and potential” with a strong performance in Q2, rebounding from temporary slowdowns throughout the beginning of the year when poor weather delayed operations and oil prices tumbled. Today, the job market continues to be strong, which is supporting consumption, and exports continue to improve.

Improving Housing Market Boosts Economy

The housing market, which is one of the largest contributors to the economy, is also stabilizing. Demand for condos and houses for sale is returning, as buyers have absorbed the affordability fallout from the federal mortgage stress test. Sustained lower mortgage rates have also helped boost real estate demand.

Stated the BoC, “At the national level, the housing market is stabilizing, although there are still significant adjustments underway in some regions. A material decline in longer term mortgage rates is supporting housing activity.”

The BoC forecasts that Canadian GDP will grow to 1.3% this year and 2% in 2020 and 2021. Inflation, which is one of the largest factors influencing rate hikes and cuts, remains close to its 2% target and is expected to stay steady into 2020.

The BoC’s Governing Council noted it will pay particular attention to developments in the energy sector and the impact of trade conflicts on the prospects for Canadian growth and inflation.

What Does This Mean for Borrowers?

Despite strong domestic economic performance, which typically would set the stage for a rate hike, the BoC has to keep rank with other central banks, and particularly the U.S. Fed, in order to prevent the Canadian Dollar from getting too strong. 

As a result, it’s expected to hold its Overnight Lending Rate – which consumer banks use to set their own borrowing rates – steady all through the remainder of this year, and may even cut it in 2020 should growth start to slow.

This trajectory was widely forecast by a poll of 40 economists conducted by Reuters – they expect the BoC will resist a cut for as long as it can, despite the likelihood the U.S. Fed will do so, with 40% expected rates will go down next year. There is very little expectation rates will be hiked during that time frame.

This means variable borrowers, whose rates are set based on the BoC’s trends, can expect price stability throughout the remainder of this year, and may even enjoy a discount to their monthly payments next year, or see a greater portion of them go toward their principal debt.

That means it can be a great time to go variable for those who are less risk-averse and have the capacity within their finances to handle the uncertainty that comes along with a market-linked rate. 

However, five-year bond yields – which consumer banks use to set the cost of borrowing for their mixed mortgage rates – also remain historically low, at well below the 2% mark. This has narrowed the difference between fixed rates – which are traditionally priced higher due to the stability they provide – and variable, meaning it could also be an advantageous time for borrowers to lock in at a discount, if they prefer.

Previous Post

Can the First-Time Home Buyer Incentive Be Used in Vancouver?

Next Post

The Big Picture: Average Rental Prices Across the Country

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

A person using a calculator.
Bank of Canada

BoC: Interest Rates Remain on Pause. What it Means for Prospective Buyers and Sellers

April 12, 2023
A neighbourhood in Canada on a sunny day with hot air balloons in the distance.
Affordability

BoC: Interest Rate Hikes Paused. How Long do Borrowers Have to Wait for Relief?

March 8, 2023
Affordability

New Year, Same Rate Hikes: The 8th Increase in 10 Months

January 25, 2023

Blog Search

No Result
View All Result

Newsletter Sign-up

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

Recent Articles

A house that needs repair

What You Need to Know Before Buying a Fixer Upper

May 26, 2023
Birds eye view of Halifax, Nova Scotia

Halifax, Nova Scotia: Your Ultimate Guide to Real Estate, Neighborhoods, Schools, and More

May 25, 2023
A row of houses.

The Bank of Canada’s Interest Rate Pause: Assessing Real Estate Prices Since Last Year’s Hikes

May 25, 2023
A picture of the Toronto skyline

Toronto Neighbourhoods: Where Buying a Condo Outshines Renting in Spring 2023

May 24, 2023

Featured Listings (Updated Weekly)

A small lighthouse in Nova Scotia

Luxury Real Estate in Halifax, NS: 7 Listings You Can’t Miss

May 12, 2023

Updated: 7 Houses Currently For Sale in Toronto Under $699,900

May 2, 2023
A detached house on a sunny day.

Updated: 7 Houses Under $900,000 For Sale in Mississauga

April 27, 2023
The outside of a detached home.

Updated: Cheapest Toronto Homes Currently Listed for Sale Under $1,000,000

April 26, 2023
first-time home buyer programs and rebates

Social Media

250 The Esplanade Suite 408 Toronto, ON M5A 4J5

Terms of Use | Privacy Policy | Careers | Sitemap | About Us

 

Zoocasa © 2007–2022. The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA.

Stay Connected

1-844-683-4663 | [email protected] 

  • 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

Zoocasa © 2007–2022. The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA.