In today’s eagerly awaited rate announcement from the Bank of Canada, they’ve decided to maintain their overnight rate. The overnight rate is what mortgage lenders use to set their prime rate, which directly influences those with variable rate mortgages and HELOCs. 

Frankly, this morning’s announcement wasn’t a shocker and is exactly what we saw coming. 

The countdown to rate cuts has begun, and like many of you, I’m on the edge of my seat waiting for it. But the big question remains:  

When will rates drop?  

 

Cuts From the Bank of Canada  

The Bank of Canada has continually stated that they are not prepared to cut their rate until they are convinced that they’ll reach their 2.00% inflation goal. Until then, we can expect the rate to remain where it is… regardless of how long it takes. At least they have taken the possibility of another hike off the table. 

The next scheduled rate announcement will be on April 10th. There were some economists who were speculating about a possible cut on this date. But now that we’re closer, it doesn’t seem likely.   

The following announcement is scheduled for June 5th. This will be an interesting one. Five of the big six banks have been forecasting for the cuts to begin in the 2nd quarter.  Scotiabank is the lone wolf, expecting them to start in the 3rd. If the majority are right, then we can expect to see a cut in June. But I wouldn’t ‘bank’ on it. It’s not exactly rare for the forecasts to be off the mark. There is no guarantee that we’ll see a cut by the end of Q2, or anytime this year for that matter. Anything can happen.  I wouldn’t be surprised if the forecasts change to push out the cuts to the 3rd quarter. We’ll find out soon enough of course.  

 

Inflation  

CPI inflation dropped to 2.9% in January, which is moving in the right direction. However, the Bank of Canada still remains “concerned about risks to the outlook for inflation” as they put it in this morning’s press release.  The report also stated that “The Bank continues to expect inflation to remain close to 3% during the first half of this year before gradually easing”.  

This means we could still see some minor increases to inflation over this period, however, it shouldn’t be reason for concern. The road to 2.00% inflation was never expected to be a straight, downward slope. It’s upward spikes that exceed expectations that would be concerning. But as long as they remain within analysts’ expectations, then everything should remain on track. 

Related blog: Positive Inflation News Sparks Optimism for Mortgage Rate Cuts  

 

Fixed Mortgage Rates Drop!

Fixed mortgage rates do not need to wait for the Bank of Canada to make a move and have a mind of their own. While there are several factors and indicators used in fixed mortgage rate pricing, they are heavily influenced by bond yields. Much like a stock, they can move in either direction at any time. All it takes is one piece of news for them to react in one direction or the other. Fortunately, the yields have been trending down for the last few weeks, which is putting downward pressure on fixed mortgage rates once again.  

The lowest fixed mortgage rates for insured and insurable mortgages dropped by 0.10% this morning, bringing the lowest possible 5 year fixed to 4.59% or 4.84% for a 3-year fixed. Note that these rates do not apply to every situation so it’s best to reach out to us directly to find out the lowest mortgage rates you’ll be eligible for.  

Related blogs:  

Is a 1 Year Fixed Mortgage Worth the Price?  

Are Variable Rate Mortgages Now Worth Considering?  

 

Conclusion  

The rate cuts will eventually come, but we’re not yet at a point where I would say they are imminent. At least not yet. The Bank of Canada wants to cut their rate… and they eventually will. But they cannot and will not take any chances of inflation. Once they’re convinced that inflation is dead, we can then expect them to move forward with their cuts.  At that point, we can expect rates to fall relatively quickly, with multiple oversized rate cuts possible.  

As of now, it’s widely expected that we’ll see the cuts on June 5th. However, it’s far from guaranteed.  Time will tell and anything can happen.