The Bank of Canada has announced today that it is raising its overnight rate by 25 basis points. That changes the overnight rate from 0.75% to 1%. This change in the overnight rate has a direct effect on the prime lending rate, which will now jump from 2.75% to 3.00%.
In recent weeks, many reports have come out projecting smaller than projected growth, although many top economists still believed that the Bank of Canada would increase the key rate. As outlined in the press release "the global economic recovery is proceeding but remains uneven, balancing strong activity in emerging market economies with weak growth in some advanced economies".
Future forecasts for growth in Canada expect growth to be solid and business investment is expected to rise. From the press release, the Bank of Canada believes that the economic recovery will be more gradual than the previous Monetary Policy Report, which was released in July 2010, mainly in part due to the weakness in the United States.
Even amidst the report of slowing economic growth, the Bank of Canada determined that allowing a 25 basis point increase would still allow for stimulation, even though there may be some financial tightening. The increase in the prime rate is one key way that the Bank of Canada tries to control the inflation rate within the country, in order for it to stay around 2%.
This rate increase of 25 basis points is the third consecutive rate increase since June 1st, 2010. Canada was the first from the Group of Seven to begin increasing interest rates, and previous publications by the Bank of Canada predicted Canada to be leading the way in terms of the global economic recovery.
However, the Bank of Canada heeded in saying "any further reduction in monetary policy stimulus would need to be carefully considered in light of the unusual uncertainty surrounding the outlook". Most economists have now tightened their forecasts for future rate increases.
Since the rate hike announcement at the policy meeting, the Canadian dollar has increased 1.09 cents, sitting at 0.9650 cents US by midday Wednesday. The Toronto Stock Exchange also felt some gains of about 0.2%.
The next scheduled date for the Bank of Canada to announce the overnight rate is scheduled for October 19, and an updated Monetary Policy Report will be released on October 20, 2010.
Current home owners with a variable mortgage are most likely wondering what this all means in terms of their existing loan. Variable rate mortgages are based on Prime lending rate minus or plus a specific amount.Contact your Accredited Mortgage Professional, Mortgage Broker today to find out more about your available mortgage solutions.
Showing posts with label variable. Show all posts
Showing posts with label variable. Show all posts
Wednesday, September 8, 2010
Tuesday, February 16, 2010
Flaherty tightens mortgage rules
Jim Flaherty announced today plans to tightened mortgage lending rules which will take into effect on April 19, 2010. Please read below. I have also included a globe and mail link at the bottom of the page.
The Honourable Jim Flaherty, Minister of Finance, today announced a number of measured steps to support the long-term stability of Canada's housing market and continue to encourage home ownership for Canadians.
"Canada's housing market is healthy, stable and supported by our country's solid economic fundamentals," said Minister Flaherty. "However, a key lesson of the global financial crisis is that early policy action can help prevent negative trends from developing."
The Government will therefore adjust the rules for government-backed insured mortgages as follows:
- Require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future.
- Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes. This will help ensure home ownership is a more effective way to save.
- Require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.
"There's no clear evidence of a housing bubble, but we're taking proactive, prudent and cautious steps today to help prevent one. Our Government is acting to help prevent Canadian households from getting overextended, and acting to help prevent some lenders from facilitating it," said Minister Flaherty. "If some lenders aren't willing to act themselves, we will act. These measures demonstrate the Government is committed to taking action when necessary to support the long-term stability of a sector that is so vital to our economy and the financial well-being of Canadian families."
These adjustments to the mortgage insurance guarantee framework are intended to come into force on April 19, 2010.
Regards,
For further information contact:
Zeenia Kola with Sales Representative with Re/Max Realty Specialists Inc. Brokerage.
Ph: 905-828-3434
Website: www.zeeniakola.com
Email: zeenia@zeeniakola.com
or visit
http://www.zeeniakola.com/AgentProfile/contactme.cfm
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