Last Wednesday, the Bank of Canada announced that they would not be adjusting their prime lending rate and that the prime lending rate would remain at 3%. This will have a direct impact on any variable rate mortgage(s), secured line(s) of credit, or personal line(s) of credit that you may have.
CPI (Consumer Price Index) inflation is sitting around the 2% mark but the Core inflation -the measurement the Bank of Canada cares about- continues to sit significantly below the 2% mark.
CPI inflation tracks the movements of the level of consumer prices over time – including volatile components such as fruit, vegetables, gasoline, and mortgage interest to name a few. Core inflation “looks through” those volatile factors which cause temporary fluctuations in prices, offering a better representation of the overall direction of inflation.
Because Core Inflation is still quite low, the Bank is likely going to hold off raising the interest rates for a while. Other contributing factors to the Bank’s decision are the performance of the global economy – as a whole, global economic growth in the first quarter of 2014 was weaker than anticipated. The US economy’s rebound is showing signs of lower-than-expected momentum. Long-term bond yields have also continued to decline, something the bank says reflects the market’s anticipation that interest rates are to remain low for quite a while.
With rates staying low, we are continuing to recommend that clients stay in their variable rate mortgages. The date of the Bank of Canada’s next announcement is scheduled for July 16, 2014.
Axiom Mortgage Solutions
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