By keeping the overnight lending rate at one percent, the Bank of Canada is basically saying the Canadian economy is not doing well enough to withstand higher interest rates.
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Toronto, Canada (PRWEB) June 19, 2014
Canadalend.com, the leading low-cost private mortgage solution provider in Canada, is releasing its expert opinion on the Bank of Canada’s recent decision to leave its key overnight lending rate unchanged at one percent and the impact this will have on the Canadian real estate market.
On June 4, the Bank of Canada announced it is keeping its overnight lending rate at one percent, where it has held since September 2010. The overnight lending rate controls the rate banks pay to each other for short-term loans, as well as also directly impacts the rate banks offer to borrowers for loans, mortgages and savings. A change in the key interest rate can also impact the exchange rate of the Canadian dollar. (Source: Isfeld, G., “Bank of Canada keeps outlook neutral on loonie, ‘weak’ inflation concerns,” Financial Post, June 4, 2014; http://business.financialpost.com/2014/06/04/bank-of-canada-stephen-poloz-holds-interest-rate-at-1/.)
“By keeping the overnight lending rate at one percent, the Bank of Canada is basically saying the Canadian economy is not doing well enough to withstand higher interest rates,” says Bob Aggarwal, president of Canadalend.com. “The central bank believes the Canadian economy will expand by 2.4% this year and 2.7% in 2015. While the struggling Canadian economy means the Bank of Canada could lower rates even further, many analysts believe it’s more likely that the overnight lending rate will start to inch higher in the second half of 2015.”
Aggarwal explains that both Canadian and global economic growth were slower than expected in the first quarter of 2014. Canada’s first-quarter economic growth slowed to the lowest pace in more than a year, while the U.S., Canada’s largest trading partner, saw a contraction in the first quarter to -0.1%, the second-worst quarterly performance since the recession ended in mid-2009.
“This tells me that the Canadian economy has room to grow. And when the Canadian economy does experience sustained growth, there is growing consensus that the interest rate environment will climb, but still stay near historic lows,” Aggarwal adds. “Even when increases are implemented by the Bank of Canada, they are expected to be modest enough to keep inflation in check.”
He notes that Canada’s artificially low interest rate environment will continue to provide first-time home buyers and those looking to refinance a great opportunity to qualify for favourable mortgage rates.
“While interest rates are at attractive levels, there are more factors to consider when looking for a mortgage,” Aggarwal concludes. “That’s why potential home buyers looking to step onto the property ladder need to contact an independent, licensed Canadalend.com agent. In most cases, a Canadalend.com agent will get their clients pre-approved for a mortgage in 24 hours. They’ll also sit down and design a personal mortgage that takes all of their client’s financial and lifestyle needs into consideration.”
Canadalend.com is one of the largest, most trusted private mortgage brokers in Canada, with skilled independent, licensed professionals helping Canadians coast-to-coast. Canadalend.com provides its clients with residential and commercial mortgages, home equity credit, debt consolidation, and help with addressing financing concerns. To learn more about Canadalend.com, visit the web site at http://www.Canadalend.com.