Bank of Canada Holds Rate in September Announcement
The Bank of Canada has opted to leave its Overnight Lending Rate untouched for September, after hiking it a quarter of a percentage back in July. However, there might be a rate hike in the coming months as the economic growth of Canada continues, as well as the uncertainty around NAFTA and our trade relations with the United States.
So, what does this mean for Mortgage Borrowers?
When it comes to the variable-rate mortgage borrowers and LoC holders, they can breathe easily as their monthly payments will remain the same, as there was no movement from the Bank of Canada. There is however an increase that will most likely happen in October, as well as more hikes expected in 2019 borrowers are expected to be prevalent in the future as rates are set to rise.
Although variable-rate borrowers are required to qualify at a higher interest rate when it comes to applying for their mortgage, this is known as the Bank of Canada’s five-year benchmark rate. It means that these borrowers already have some financial leeway padded into their home affordability. However, it’s a good idea to review how a moderately higher mortgage payment will impact household budgets.
Fixed-rate mortgage borrowers are not directly impacted by the Bank of Canada’s movements, factors behind the fixed-rate pricing will react to the lack of the rate hiking. This could lead to a slightly lower rate for new fixed-rate mortgage applicants in the short term.
The next announcement from the Bank of Canada will come on October 24, 2018 and if there will be a rate hike. One of the major factors will be NAFTA and the economic uncertainty it will have on the Canadian economy.