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The Bank of Canada released their statement last week which included the announcement that the overnight rate would remain unchanged at 1.75%. This was expected but many are wondering if and when further increases will come about.

The Bank was confident that they would be implementing continued interest rate hikes in order to steer the rate of inflation in the right direction. The goal for optimal growth in an economy is 2.2% inflation. Interest rate hikes began in July 2017 and continued until 2018. At which point the Bank announced their intention to wait and see what would happen in global and domestic markets and trade. It looks like they’re still gathering intel before they make a move.

“Recent data suggest that the slowdown in the global economy has been more pronounced and widespread than the Bank had forecast in its January Monetary Policy Report,” the statement from the Bank informed us. It was anticipated that Canada would experience a temporary slow down at the start of 2019, but it has turned out to be “sharper and more broadly based” than expected. The Bank stated, “it now appears that the economy will be weaker in the first half of 2019 than the Bank projected in January.”

Canada’s overall rate of inflation in 2018 was 1.4%. The optimal rate we aim for is 2.2%. Alberta itself reached an overall inflation rate of 1.2% for 2018, with deflation rates of -0.5% in November and -0.1% in December. The start of 2019 left us with a flat inflation rate of 0% in January.

Despite this, mortgage owners do have something to be thankful for. James Laird, President of CanWise Financial said, “Variable rate holders should be pleased, as any increase to prime rate will be further in the future than the Bank has signaled in prior rate announcements. Overall this announcement will be helpful to first-time homebuyers looking to enter the housing market this spring.” On top of that, “the softening rate outlook [from the Bank] will put downward pressure on bond yields, causing fixed rates to drop as we enter the spring homebuying market.”

If you’re worried that lower interest rates won’t make a difference if you’ve struggled to pass the mortgage stress test, here’s something that might perk you up. The Regulator for the Office of the Superintendent of Financial Institutions (OSFI) stated off the record at a meeting of Canadian Mortgage Influencers that the mortgage stress test worked “too well.” Maybe this test will become a little less stressful or done away with altogether. Stay tuned.

To find out how the current economic climate is influencing your mortgage, contact us today.