With the next Bank of Canada key interest rate announcement set for December 11th, mortgage experts are predicting the rate will be held where it is.
This overnight lending interest rate is often called the policy interest rate, key interest rate or target rate.
It essentially acts as the benchmark cost of borrowing set by the central bank.
When the rate is updated—either dropped or increased—it influences the interest rate that lenders use for variable loans, lines of credit and mortgages. This means that potential homebuyers may get a cheaper loan if this rate is lower.
Since April 2024, this rate has been slowly cut by the Bank of Canada, from 4.75% to the 2.25% it is today.
Penelope Graham, a mortgage expert at Ratehub.ca believes that the Bank of Canada will settle into a holding pattern, following the last announcement which decreased the rate to 2.25%.
“Its Governing Council clearly indicated they feel the current policy rate level is right to support the economy and temper inflation, while also pointing out that monetary policy can only do so much while businesses adapt to the current trade scenario,” said Graham.
“Fiscal support will be needed to support affected industries, rather than lower interest rates alone.”
She added that third-quarter GDP data surprised economists in a pleasant way. Graham says that this growth was largely due to government spending, which helped the economy avoid a recession.
Currently the CPI rate, which dictates inflation in Canada, is sitting at around 2.5%, which is over the Bank of Canada’s goal, but unlikely to scare the central bank into raising the key interest rate.
Graham says that a rate hold will impact the housing market and mortgage rates, because prospective homeowners are unlikely to see lower rates any time soon.
“Given the Bank’s stance and economic landscape, it’s unlikely variable mortgage rates will decrease in the near future,” she stated.
“However, current variable rate pricing is still the best it’s been since 2022, with five-year terms as low as 3.45%.”
Furthermore, she says fixed mortgage rates also remain competitively priced, but are facing upward pressure as bond yields climb.
“Anyone shopping for a mortgage rate, or coming up for renewal on their existing one, should take out a rate hold and pre-approval immediately, in order to guarantee access to today’s attractive rates,” concluded Graham.
More to come on Thursday, December 11th, when the Bank of Canada delivers their interest rate announcement.
