The Bank of Canada is holding at 0.50% today, July 13. A rebound from Alberta’s fires is expected, but weak investment and exports make the full-year outlook less encouraging. If you are buying or renewing in Greater Sudbury, I would judge the payment against your own budget instead of assuming a stronger quarter will carry the local market with it.
The decision at a glance
| Policy measure | Announcement |
|---|---|
| Overnight target | 0.50% |
| Change | No change |
| Bank Rate | 0.75% |
| Deposit rate | 0.25% |
A rebound follows the fires, while investment remains weak
The Bank estimates an annualized 1% contraction in the second quarter after annualized growth of 2.4% in the first. Wildfires, uneven consumer spending and volatile trade contribute to that reversal. It expects an annualized 3.5% rebound in the third quarter as oil production resumes and Fort McMurray rebuilding begins, with household spending also supported by the Canada Child Benefit.
The annual picture is more subdued than that rebound suggests. Weaker business investment and exports reduce the growth forecast to 1.3% in 2016 and 2.2% in 2017. The Bank expects the economy to reach full capacity toward the end of 2017, later than in April. One strong rebound quarter would not erase the underlying weakness.
Brexit adds uncertainty, while financial vulnerabilities are elevated, particularly in Toronto and Vancouver. Inflation is expected to settle near 2% during 2017. The Bank holds because the overall risk balance still supports the current setting. Here in Greater Sudbury, I would separate a temporary national rebound from durable local demand and income. Compare the particular home and its carrying costs with relevant local alternatives. May’s decision explains why the wildfire disruption should not be mistaken for a lasting rate signal.
What this means for a mortgage
The overnight target influences short-term borrowing costs, including lender prime rates. Variable mortgages and home-equity lines of credit are more directly exposed to prime-rate changes. Fixed mortgage offers also depend on bond yields, funding costs, the term and lender competition; they can move even when the Bank holds.
The Bank’s most recently available weekly bulletin before today’s decision reports these posted reference rates as at July 6, 2016. They are typical posted rates at six major chartered banks, not discounted offers or an assurance of the rate you could obtain. Today’s policy hold does not itself change a lender’s offer.
| Posted reference | Rate |
|---|---|
| Prime | 2.70% |
| One-year conventional mortgage | 3.14% |
| Five-year conventional mortgage | 4.74% |
Payment illustration: a $300,000 mortgage amortized over 25 years at the 4.74% posted five-year rate is approximately $1,701 per month for principal and interest, using Canadian semi-annual compounding. This is an illustration, not a lender quote. Taxes, insurance, utilities, closing costs and qualification requirements are separate.
Put the announcement into a Greater Sudbury plan
Buying or renewing
Ask for written figures using your balance, down payment and amortization. Compare payment mechanics, prepayment options, penalties and the cash left after closing. A variable mortgage with fixed payments may change how much principal you repay instead of changing the payment immediately; the contract determines the result.
Preparing to sell
Financing affects what buyers can carry, but it does not set one price for every home. Compare recent sales and active alternatives in the same neighbourhood and price range. Condition, carrying costs, presentation and offer terms remain central to the decision.
Official announcement: Bank of Canada, July 13, 2016. The national policy decision does not, by itself, establish a change in Greater Sudbury property values.
For a local plan, explore the Buyer Experience or Seller Experience.
Expect Moore for Your Real Estate.
— Chad Moore, REALTOR®
— Lake City Realty Ltd., Brokerage