The Big Five Follow Suit
It’s been two weeks since The Bank of Canada raised their interest rate for the first time in seven years, to 0.75%. The increase has been a long time coming, and the Canada’s Big Five [banks] have already followed suit, raising their prime rates and affecting a number of products including mortgages and loans.
The Bank of Canada hadn’t increased the overnight rate since August 2010, when it nudged it up to 1%. After Poloz took over as governor of the bank, the rate was lowered twice in 2015 (to 0.5%), where it has remained until July 12.
What Can We Expect?
The result is a bit of a double-edged sword for prospective buyers and sellers. While on one hand, this will directly affect some current mortgage holders and will certainly change the amount buyers can spend. It also is an indication of a healthier Canadian Economy. In the wake of the rate hike, the Canadian dollar has already shot up. The loonie was up at 78.48 cents US the day following the announcement.
The move is also expected to cool some of the competition in Toronto’s housing market, as buyer’s reign in their budgets, multiple offers and bidding wars should be reduced, returning us closer to what would be considered a ‘normal market’.
