Mortgage Rates Remain Unchanged in BoC December Announcement – but what next?

Posted admin on 15 January, 2019 0

In the December announcement, the apex financial body in Canada, Bank of Canada, decided to maintain the Overnight Lending rate at 1.75%. Although only two months ago, this unprecedented low lending rate was hiked by BoC, considering the market economic condition, no further hike was announced. While this was a welcome news to Canadian Real estate industry as it can fuel some buying sentiment in potential buyers, future hikes are certain to come.

Market Background

The stricter mortgage criteria and lending standards introduced last year have had a strong impact on the housing market. Furthermore, plunging oil prices and weakening energy market has also posed some threat to the stability of Canadian economy. In order to stabilize the real estate market, BoC slashed the Overnight lending rate drastically, so that borrowers and buyers may be motivated to purchase.

But this was only a temporary move and BoC intends to bring up the lending rate within the more neutral range of 2.5% – 3%. This is why it was expected that BoC will follow up the October hike with another interest rate hike in December, but the BoC took a cautious stance considering the market dynamic.

Future interest rate hikes

It is expected by analysts that BoC will soon be looking to increase the lending interest rates as a contributing measure for the achievement of inflation targets in 2019. These hikes are expected to follow BoC’s assessment of the economy and key influencing factors of oil prices and business investments.

Global trade policy development and the impact of increasing interest rates on housing consumption can dictate the pace at which the interest rates will be hiked. Analysts expect that BoC will stagger the interest rate hike and will aim to reach the neutral interest range by the end of 2019.

How it will affect buyers?

All large financial institutions in Canada, including BoC will be extending mortgage at 1.75% as the Prime borrowing rate, until further developments. As the market seems poised for increase in lending rates, this seems to be the best time for buyers to invest in real estate and make the most out of the lock-in of pre-approvals.

As 2019 will see a steady increase in lending interest rates, potential buyers and borrowers should take fast action and complete their property search on priority to complete the mortgage formalities before the next interest rate hike is announced by BoC.

At Toronto Condo Only, we are passionate about new land developments and since 2007, we have helped clients get the best deals and the properties. Monty Malhi has and continues to build formidable relationships with reputable developers and major industry players to give clients first access to the most desirable and sought after projects in and around the GTA. First access to securing units at most projects can amount to considerable price savings of over $20,000 – $50,000. Clients trust our industry knowledge of the real estate investment market throughout Greater Toronto, which is the foundation of our success to buy low and sell high. With our broad vision and innate ability to understand real estate properties, including pre-construction low-rise and high-rise condos, resale homes and commercial properties, we have achieved continued success for our clients and ourselves.

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