Last week’s news by the Bank of Canada to not raise overnight prime interest rates was another blah moment.
For the past four years the Bank of Canada (BoC) has maintained its position that the inflation rate will remain stable and that we will see normalized growth in the next couple of years.
The BoC likes the inflation rate to lie around the 2% mark, and it’s been edging along the 1% mark while economic growth in Canada has been at a meagre 1.6%, making it easy for them to hold the rate steady.
This is great news for those looking to buy homes in the near future as this government announcement will likely put some pressure on the bond markets (that affect the fixed rates) thus lowering them from their very recent height of 3.99%.
Some are saying that we may see another couple of years of lowered prime interest rates until we see stronger economic gains. Outside of Alberta, Saskatchewan and Newfoundland economic growth isn’t that strong and without the strength of these three provinces our national economic growth would likely be in the negative territory.
With these low interest rates and our strong economic growth in Alberta we should be seeing further housing gains here at home. As long as the price of oil stays relatively flat, we’ll have strong gains going forward.
Our oil sands production output is supposed to double in the next five years and then double again from there in the next 10 years adding more fuel to our own growth.
Going forward I think we’ll see more people going to variable rates as there’s a 1% spread between it and the fixed. But recently we’ve also seen the bond yields drop as well, tightening that value. It’s going to be interesting moving forward and again, we are very fortunate to be living in Alberta!
Jean-Guy is an Accredited Mortgage Professional with Dominion Lending Centres- Regional Mortgage Group.