The Bank of Canada (BoC) unexpectedly cut its trend-setting rate in January to 0.75 percent, and left some analysts predicting the central bank would do the same at least once more before the beginning of summer. Once the BoC cuts its rate, lenders tend to follow suit, which means consumers get the advantage of lower rates on variable rate loans and mortgages. Are record low mortgage rates bad for Canada?
Bank of Canada Lowers Its Rate to Historical Low
Lower BoC rates was supposed to be a type of insurance against the fall in oil prices. Crude prices eventually hit a six-year low and data gathered has shown it has resulted in job losses. The Canadian dollar tumbled in February, and hit an almost six-year low of just over C$1.28 per US dollar.
The BoC has said that it wants to see the country’s exports and business exports “take over from debt consumers” as the main driver of this country’s economy. A lower dollar has given manufacturing activity a boost, but has not seen employment numbers rise the way the Bank had hoped.
Now that crude prices are starting to rebound and have closed above $60.00 a barrel for the first time in nearly five months, conditions are more favourable than they were when the decision to cut the interest rate was made. It will still take some time for the economy to start growing again, though.
Are Record Low Mortgage Rates Bad for Canada? The Answer
Record low mortgages aren’t necessarily bad for Canada. Record low mortgage rates are good for consumers who are either interested in buying a home or who are looking at refinancing or have their mortgage up for renewal now. If it means that more people can afford to get into their own homes or frees up cash so that homeowners have more money to spend on goods and services, it’s good news for the Canadian economy.
If, however, it means that consumers end up buying more house that they can afford when interest rates start to rise (as they will eventually) or they use the opportunity to refinance and pay off debt only to start accumulating it again through spending on credit cards and lines of credit, this is not good for them or the country.
Record low mortgage rates are good news for consumers, and a mortgage broker can help you find a mortgage at a low rate with the terms that fit your budget and lifestyle. Call Mark Price today for your personal consultation.