{"id":15753,"date":"2018-09-05T10:50:07","date_gmt":"2018-09-05T14:50:07","guid":{"rendered":"http:\/\/www.zoocasa.com\/blog\/?p=15753"},"modified":"2018-09-05T10:50:07","modified_gmt":"2018-09-05T14:50:07","slug":"the-boc-holds-rate-in-september-announcement","status":"publish","type":"post","link":"https:\/\/www.zoocasa.com\/blog\/the-boc-holds-rate-in-september-announcement\/","title":{"rendered":"The BoC Holds Rate in September Announcement, But More Hikes to Come"},"content":{"rendered":"

The Bank of Canada has opted to leave its trend-setting Overnight Lending Rate untouched this month, after hiking it by a quarter of a per cent in July<\/a>. However, it remains optimistic regarding economic growth, pointing to more hikes to come this year despite continued uncertainty around NAFTA and trade relations with the United States.<\/p>\n

BoC Not Swayed by Stronger-Than-Expected Inflation<\/h2>\n

Indeed, perhaps the Canadian economy has run hotter than expected in August, as the rate of inflation surged above 3 per cent for the first time since 2011<\/a>, fueled by higher airfare and energy prices. While that amped up analysts\u2019 predictions of a September hike, pinning the likelihood at a one-out-of-four chance, the BoC says it remains committed to a slow and steady approach.<\/p>\n

\u201cRecent data reinforce Governing Council\u2019s assessment that higher interest rates will be warranted to achieve the inflation target,\u201d states the BoC\u2019s release<\/a>. \u201cWe will continue to take a gradual approach, guided by incoming data. In particular, the Bank continues to gauge the economy\u2019s reaction to higher interest rates.\u201d<\/p>\n

Housing Market Stabilizing After Mortgage Rule Changes<\/h2>\n

According to August data, the economy continues to strengthen in line with the Bank\u2019s predictions; GDP improved by 1.4 per cent and 2.9 per cent in the first and second quarters respectively, and will cool slightly in Q3 as energy and export prices are expected to dip.<\/p>\n

However, many positives, such as improving business investment, employment, and a stabilizing housing market underpin economic stability; the housing market, in particular, is starting to even out after a tumultuous year, as borrowers adjust to a higher interest rate environment and new mortgage qualification rules put in place in January<\/a>.<\/p>\n

There\u2019s also good news for highly-indebted Canadian households, as the Bank reports the national debt-to-income ratio \u2013 the amount a household owes in relation to what it earns \u2013 has edged lower, reducing the overall risk posed by consumer debt to the economy.<\/p>\n

Based on this, as well as investment activity, the odds of an October hike are\u00a0two out of three.<\/p>\n

What Does This Mean for Mortgage Borrowers?<\/h2>\n

Variable-rate mortgage borrowers and\u00a0LoC holders can breathe a sigh of relief, as no movement from the BoC means their monthly payments will remain the same. However, with an October increase so strongly anticipated, and with more hikes expected to come in 2019, it\u2019s important for borrowers to be prevalent as rates are set to rise in the near future.<\/p>\n

While variable-rate borrowers are required to qualify at a higher interest rate when applying for their mortgage \u2013 known as the Bank of Canada\u2019s five-year benchmark rate \u2013 meaning these borrowers already have some financial leeway padded into their home affordability, it\u2019s a good idea to review how a moderately higher mortgage payment will impact household budgets.<\/p>\n

While fixed-rate mortgage borrowers are not directly impacted by BoC movements, factors behind fixed-rate pricing will react to this month\u2019s lack of rate movement, which could lead to slightly lower rates for new fixed mortgage applicants in the short term.<\/p>\n

The long-term trend for borrowers \u2013 and whether ongoing NAFTA uncertainty will impact the economy – will become more clear on October 24th<\/sup>, when the BoC makes its next rate announcement.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Bank of Canada has opted to leave its trend-setting Overnight Lending Rate untouched this month, after hiking it by a quarter of a per cent in July. However, it remains optimistic regarding economic growth, pointing to more hikes to come this year despite continued uncertainty around NAFTA and trade relations with the United States. […]<\/p>\n","protected":false},"author":39,"featured_media":15754,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jnews-multi-image_gallery":[],"jnews_single_post":[],"jnews_primary_category":[],"footnotes":""},"categories":[196,33],"tags":[],"class_list":["post-15753","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-bank-of-canada","category-real-estate-news"],"yoast_head":"\nThe BoC Holds Rate in September Announcement | Zoocasa<\/title>\n<meta name=\"description\" content=\"The BoC holds rate in September announcement: Canada's central bank has left its trend-setting interest rate 1.5%, despite much stronger inflation than...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.zoocasa.com\/blog\/the-boc-holds-rate-in-september-announcement\/\" \/>\n<meta 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