HBM Explains the Recent BOC Interest Rate Decision

Toronto, ON, Canada -- With the Bank of Canada holding interest rates steady at 1%, many would see clear skies for the foreseeable future.  Although, the forecast appears bright, there are some winds of change in the air beyond the calm exterior displayed by the BOC.  With global financial troubles slowly making their way to our seas, and domestic and household debt creeping ever higher, there are several factors that you should be aware of if you’re looking for a home mortgage.

First and foremost, it should be noted that although we’ve rode the tidal wave of global turmoil the past few years with very little effect on our own economy, these troubles overseas are not going to go away.  With Greece on the brink of a Euro fallout and Spain receiving a large bailout sum in the past couple weeks, time will only tell if these band aids can heal a wound that has been decades in the making.  These issues weren’t created overnight and it is going to take some time before the European markets will stabilize once again.  Overall, we can expect a deterioration of financial conditions across the globe over the next couple years, which could affect your interest rates for a first or second mortgage.

Beyond the cloud that has been cast by the global financial instability of recent years, Canada’s commodity markets are also experiencing a slowdown.  As the Bank of Canada has noted “While the U.S. economy continues to expand at a modest pace, economic activity in emerging-market economies is slowing a bit faster and a bit more broadly than had been expected. More modest global momentum and heightened financial risk aversion have reduced commodity prices.”  This statement gives us a good idea of how the Bank of Canada see’s the commodity markets worldwide.  Overall, although many markets are growing, albeit at a modest pace, we are also seeing many emerging economies worldwide growing at slower and slower rates. This is very troubling for major markets like China.  This is creating a weakness in the commodities market, which is not good news for Canada.

Although the housing market has remained stronger than expected, we also must be cognizant of the rising household debt burdens that Canadians are facing compared with a modest growth in income levels. 

With interest rates remaining at 1%, the future will likely see modest increases over the next couple years.  With many political and economic factors remaining uncertain, only time will tell if these rates hikes will come sooner or later.

Home Base Mortgages is a leading Toronto mortgage broker, which specializes in all types of mortgages ranging from home equity loans, second mortgages, private mortgages, mortgage refinancing, home mortgages and hard money lending.

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Mike Smith

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Home Base Mortgages

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