Bank Of Canada Keeps Rates Steady At 5.00%

Bank of Canada Keeps Rates Steady at 5.00%

The Bank of Canada announced that it would hold its overnight target rate at the 5.00% level, maintaining the status quo amidst its ongoing battle against inflation. While the central bank acknowledged some recent moderation in pricing pressures, it cautioned that higher rates could still be needed to decisively rein in persistent inflation.

So what does this latest rate decision mean for Canadian borrowers and homeowners? Here are a few key takeaways:

Mortgage Rates Stay Elevated...For Now

Variable mortgage rates that follow the Bank’s overnight rate will remain at their current elevated levels of around 6-7% after this announcement. Those on fixed-rate mortgages won’t see any immediate change. However, anyone renewing or entering into a new mortgage term will continue facing significantly higher borrowing costs compared to the historically low rates of the last decade.

Potential Rate Cuts Coming Later in 2024?

The Bank signaled that while it’s keeping its ammunition ready with higher rates for now, rate cuts could potentially be on the table in the latter half of 2024 if inflation continues decelerating as projected. Financial markets are already betting on rate decreases beginning mid-year.

For variable-rate mortgage holders, this could eventually bring some relief from today’s high carrying costs. Those able to stick with their variable terms may see rates drift lower again before too long.

Consider Locking in a Fixed Rate

With fixed vs variable rate considerations, the calculus has flipped recently. Locking into a fixed rate in this higher rate environment could end up being the more prudent choice for budgeting certainty, at least for the next few years. Discuss locking strategy with your mortgage professional.

Overall, Canadian borrowers are advised to plan for rates to remain elevated over the next couple of quarters at least. But potential rate cuts could provide light at the end of the tunnel in late 2024 if the inflation battle continues tilting in the right direction.

As always, our team at Mortgage Winners is staying closely tuned to economic developments and Bank of Canada communications. We’re here to help you make the most informed decisions to manage your mortgage costs effectively through this higher rate cycle. Reach out anytime for a consultation!