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Cynthia Jones
Sales Representative

Royal LePage Signature Realty

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The Bank of Canada announced this morning that they will be maintaining their overnight rate, which means no change to prime rate. The announcement came at 10am this morning, March 7th, 2018.

Prime rate will remain at 3.45%.

This was fairly easy to predict considering bond yields have been falling since mid-February, which is a pretty good indicator that nothing is expected to happen. While it's always possible that the prime rate could decrease, I would say that is not likely in the near future. But of course, anything can happen and the BOC has shocked us before. Canada's economic growth has been sluggish and has came in below expectations for the fourth quarter of last year, and has been badly outperformed by the US.

The Bank of Canada would ideally like to increase the overnight rate again by the summer, however, there is too much uncertainty with Canada's economic growth. The Canadian dollar isn't exactly lightly up the stage and has been one of the worst performing currencies in the world over the past six months.

We've seen three increases to prime rate since July 2017 after having enjoyed an increase-free prime rate for close to 7 years. The Bank of Canada will likely have to put the brakes on further increases until they have a bit more economic certainty. There is still a chance that prime rate could very well increase again later this year, but our economy continues to falter, then they may be forced to go in the opposite direction. Anything can happen.

The deepest discount on variable rate mortgages right now is prime -1.24% (2.21%). This rate however is only available to those purchasing with less than 20% down payment and therefore CMHC insured (and on switches of mortgages what were originally insured), as well as those with 35% or greater equity / down payment. Property value must be under $1 million (or at least must have been under $1 million at time of purchase). Rate quoting has definitely become a lot more complicated than it had been in the past.

Lowest 5 year fixed rates have now increased to 3.04% with market rates being 3.64%. Again, for lowest rates your mortgage needs to either be insured by CMHC, or have at least 35% equity with a property value under $1 million. Fixed rates are determined by bond yields, which have been decreasing. If the downward trend continues, we should see some lower fixed rates soon.

The next interest rate announcement will be on April 18, 2018.

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