As reported by the Canadian Press, home buyers and sellers should gear up for mortgage rate hikes sooner instead of later.
That’s because, while the Bank of Canada this week declined to change its current 1% overnight rate (which banks use to formulate their mortgage and other lending rates), it announced in a statement that the economic recovery, if it continues, will inevitably lead to hikes in the near future.
"To the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed,” the Bank of Canada noted in its statement, “some of the considerable monetary policy stimulus currently in place will be eventually withdrawn."
For those who have been closely following the Bank of Canada’s actions (or inactions) over the past few years, this news may not seem all that newsworthy. After all, the Bank’s Governor Mark Carney has been rather vocal over the last few months about how consumers should prepare for higher rates.
However, what makes this week’s statement different – and more impactful – is that the Bank has never actually officially signalled that it will eventually bump of interest rates. But that’s what it did, and so barring an unforeseen shock to the economy, it’s pretty much a foregone conclusion that sometime this year the Bank’s rate – and hence, mortgage rates – are on the way up. Some analysts are even predicting the increases to start as early as September.
If you’re planning on buying a home: the impending rate hike does give you an attractive financial incentive to put your home buying plan into action sooner, instead of later. Though the mortgage rate hike won’t be severe, even a difference of .50 basis points can mean tens of thousands of dollars in interest in the long run. I’m sure the buyers out there reading this can find better things to do with that cash then give it to the bank in interest!
If you’re planning on selling a home: this means a couple of things. For one, it means that per the point I raised above, there are going to be some pretty motivated buyers out there who want to “close the deal” before the rate hikes start coming. That gives you a good reason to put your home selling plan into action. Also, chances are you’ll need a new mortgage for your next home – and you’re obviously better off getting that in place prior to the hikes, too.
I’ll build your customized buying, selling or buying and selling plan – one that helps you get ahead of the mortgage rate hike curve. Call me at 780-709-0811. I’m here to help!