While we cannot lay claim to a functional crystal ball – there are certainly a number of clues that can help us understand what factors the Bank of Canada must weigh before making an interest rate decision.
Next week, the Bank of Canada will once again announce whether or not there will be any changes to the interest rate environment in Canada. This meeting, on Wednesday, May 25th, will mark the fourth rate announcement this year from the Bank of Canada. The three previous announcements this year resulted in no change to the overnight lending rate; the key interest rate which dictates the rate in which Canada’s largest lending institutions lend and borrow money among one another.
The overnight lending rate also influences the ‘prime rate’ which lenders and banks in Canada use to offer variable rate mortgages to homeowners in the country. You may be familiar with the phrase, “discount off of prime”, which refers to a particular mortgage rate as a discount off of a floating rate, or ‘prime’.
Most analysts and prognosticators predict that the Bank of Canada will continue to keep rates low for the foreseeable future, as currency inflation remains low and the Canadian economy continues to grow relatively slowly. The possibility of negative interest rates has also been introduced by the Bank of Canada Governor, Stephen Poloz.
While negative interest rates aren’t in the cards for next week – the Bank of Canada is expected to keep the overnight rate at the status quo, meaning that Canadian home-owners currently in a variable rate mortgage product can continue to celebrate their historically low rates and take advantage by paying down their mortgage faster.
The fixed versus variable rate mortgage debate is an ageless discussion with very strong arguments from both sides of the fence; however, an often referenced piece of research from York University Professor Moshe Milevsky has shown that the variable rate mortgage has beaten the fixed rate mortgage 90 per cent of the time.
MonsterMortgage.ca has long been a proponent of the variable rate mortgage; helping to save our clients thousands of dollars in interest and keeping more money in their pocket, not their banks’.
If you have any questions about whether or not a variable rate mortgage is the right product for you, contact MonsterMortgage.ca today by filling out the contact form at the top of this page or by calling MonsterMortgage.ca today!BACK TO BLOG FEED