On May 29, 2019, for the fifth time in a row, the Bank of Canada maintained interest rates at 1.75%.
This announcement falls in line with industry expectations. Most experts agreed that there would be no increase today. Furthermore, most believe that any raise this year is unlikely.
That spells good news for variable rate mortgage holders, who were probably very nervous last year when rate increases seemed likely.
There’s been a lot of turmoil in the global economy lately, and the Bank of Canada is trying to mitigate the damage to Canadians.
Canada has an unusually high amount of debt-per-person when compared to other developed countries, with a lot of debt (and money) tied up in real estate. Rate increases would mean it would become a lot more expensive to hold that debt. When debt becomes too expensive to afford, defaults and bankruptcies are sure to follow. Businesses also benefit from lower rates, as they can take on debt to expand their business relatively cheaply.
For the foreseeable future, it seems that rates are going to stay the same, or even decrease (despite being near historical lows).
If you currently have a fixed rate mortgage, nothing changes as usual. Even if rates to increase/decrease, fixed rates always stay the same for the length of the term.
If you are looking to get a new mortgage, whether you’re buying a new home or refinancing your current one, this is good news. Rates aren’t likely to increase, and even fixed rates have been trending downwards, despite the Bank of Canada rate staying the same for over 6 months.
If you have a variable mortgage, this is also good news. Variable rates are nearly always cheaper than fixed rates (when compared at the same time) but have the potential to go higher. With these announcements, variable rates haven’t increased past fixed rates.
So, good news for everyone already in or looking to get into the mortgage market.
To see how rate increases (or decreases) check out our mortgage payment calculator.