Good news for buyers! Bank of Canada’s key overnight rate remains unchanged.
Why is this important if you’re looking to get a mortgage?
The overnight rate is the interest rate which financial institutions use when borrowing and lending overnight funds between each other, and the Bank of Canada sets a target level, known as the key interest rate, for that rate. Changes in the overnight rate influence other interest rates, including mortgage rates.
While banks and other major lenders don’t have to follow the BoC’s change in rates, most will use the key interest rate as a guide and raise and/or lower their prime interest rate accordingly in order to remain competitive.
“The really good news for homebuyers is that they benefit with lower rates on their mortgage,” said James Robinson, a mortgage agent with Dominion Lending Centres. “Of course, this also means that the upward price cycle of real estate will continue. What is famed through lower rates is eroded through higher prices.”
Although there is an ongoing debate regarding when the Canadian housing market will cool, and whether or not we’re already seeing signs of cooling trends in particular markets across the country, the fact that the BoC remains unchanged means that the Bank sees inflation as being on target, low rates are still needed to promote economic growth, and they don’t want to take any kind of aggressive action to upset the balance.
The next interest rate announcement and monetary policy report is scheduled for July 13th.
*Content sourced through CanadianRealEstateMagazine.ca