As expected, the Bank of Canada maintained its overnight rate this morning in the first scheduled rate announcement of 2020. The overnight rate is what the banks base their prime rate on. The non-bank lenders then follow the major banks. Since the overnight rate remains unchanged, so does prime rate, which is currently 3.95%.
While these Bank of Canada interest rate announcements typically only affect those with variable rate mortgages or HELOCs, they can have an indirect influence on fixed mortgage rates. Fixed mortgage rates are heavily influenced by bond yields, which had a large drop yesterday, and then again today (down 4.79% today as of 3pm).
These drops will be enough to allow lenders to comfortably drop their fixed rates. As I predicted late last year, we would likely see a drop to fixed mortgage rates at some point toward the end of January. While they have not dropped yet, it’s coming. I would expect to see lenders drop their rates by the end of this week should the yields continue to fall or stay at current levels.
The next scheduled rate announcement is March 4th, 2020. Will we finally see the cut we have been expecting on this date? While it’s a possibility, there are some economists that believe the BOC will keep the rate unchanged for the entire year, while others are still maintaining that we could see a couple of cuts by the end of the year.
So how can we know what to expect?
We really can’t, so you may as well flip a coin at this stage.
Leading economists are split, which is further evidence to support the amount of uncertainly revolving around the economy. Regardless of the predictions, everything can change based on a single, spur of the moment decision from Trump. He has a tremendous amount of influence, and as you already know, can be quite unpredictable. Since he is unpredictable, so is our economy. The verdict? No one knows for sure and anything can happen.
“Paul Meredith is the author of the Amazon #1 best selling book, Beat the Bank
– How to Win The Mortgage Game in Canada, and has ranked as one of the top
75 mortgage brokers in Canada since 2016. He was a finalist for Mortgage
Broker of the Year in 2018, and can be seen as the exclusive mortgage broker on
season two of TV’s Top Million Dollar Agent.”