Posted in BCMortgage, Best Rate Mortgages, British Columbia Mortgages, Canadian Economy, Canadian Housing Market - Lisa Alentejano, Canadian Mortgage News, Kamloops Mortgage Broker, Low Interest Rates, Mortgage Affordability

Bank of Canada holds key rate

Widely predicted by economists, forecasters, banks and average people nationwide, Mark Carney held the rate again.  The BOC has maintained its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

A softening economy both south of the border, and globally, with the addition disconcertion of a full blown financial crisis simmering in Europe was enough  encouragement for Carney to hold steady.

Although commodity prices have slid somewhat recently, they are expected to remain high over the coming months, because of strong global demand, in particular from emerging markets.

The Bank of Canada predicts too, that inflation will stay higher than the optimum 2%: “While underlying inflation is relatively subdued, the Bank expects that high energy prices and changes in provincial indirect taxes will keep total CPI inflation above 3 per cent in the short term. Total CPI inflation is expected to converge with core inflation at 2 per cent by the middle of 2012 as excess supply in the economy is gradually absorbed, labour compensation growth stays modest, productivity recovers and inflation expectations remain well-anchored.”

Although some experts predict that a rate hike could take place over the summer, the vast majority of those in the know pick September as the likely month for the next rate hike to take place.  If that is the case, it will have been a full calendar year since the last rate hike- which took place in September 2010.

There is no question that a continued rate hold is promising news for the housing market- as prospective homebuyers may view this latest move as a temporary reprieve- and move towards action more readily- sensing that this is indeed a time limited offer.

There are concerns though, among many analysts, that affordability is an increasing concern in many regions across the country- and that the combination of rising property prices and higher interest rates may be enough to push home ownership out of reach for some- or land those home owners that are on the fringe in hot water.

There is a sense of ebb and flow in relation to the housing market, and the Canadian economy in general though, suggests the BOC: “The possibility of greater momentum in household borrowing and spending in Canada represents an upside risk to inflation. On the other hand, the persistent strength of the Canadian dollar could create even greater headwinds for the Canadian economy, putting additional downward pressure on inflation through weaker-than-expected net exports and larger declines in import prices.”

For now though, it is business as usual.



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