For the second time in a little less than two months, the Bank of Canada has cut their overnight interest rate, which will have a direct impact on homeowners and those seeking to purchase.
The rate has now dropped from 4.75% to 4.5%.
The overnight interest, or key interest rate, determines how banks lend or borrow funds from the Bank of Canada.
This in turn impacts mortgage rates as well as general borrowing rates for all Canadians.
The Bank has been slowly bumping the rate up to slow down buying and decrease the rate of inflation in Canada over the past four years.
This has been making borrowing and spending more expensive, but because it is now coming down, this means the Bank of Canada is wanting Victorians to begin spending more in order to balance the economy.
On Wednesday, July 24th, the Bank issued a release detailing the state of the economy and the reasons for their dropping the rate for the second consecutive month, and for the second time since March 2020.
Related:
- Victoria mortgage broker predicts reduced interest rate may increase home buyers’ confidence
- Bank of Canada cuts key interest rate for the first time since March 2020
The Bank of Canada says that the consumer price index (CPI) inflation rate has moderated to 2.7% in June after increasing in May.
They add that across the board, inflationary pressures are easing in Canada and core inflation has remained below 3% for several months.
However, the Bank did add that costs of housing remain high and are climbing, and this is due to rent costs as well as mortgage interest costs.
An additional driver of inflation is the service industry, such as restaurants, and this is because of wage increases as well as overhead costs like rent and utilities.
The Bank predicts price pressures to continue to ease and inflation to move closer to 2% in the near future.
The next scheduled announcement for the overnight rate target is September 4th.
