The Bank of Canada raises to 1.75% on October 24, 2018. The 25-basis-point increase moves the announced target from 1.50%. Reduced North American trade uncertainty supports another increase.
The decision at a glance
| Policy measure | Announcement |
|---|---|
| Overnight target | 1.75% |
| Change | +25 basis points |
| Bank Rate | 2.00% |
| Deposit rate | 1.50% |
Reduced North American trade uncertainty supports another increase
The new US-Mexico-Canada Agreement reduces an important source of uncertainty for business investment. Together with the recently approved LNG project in British Columbia, it leads the Bank to raise its investment and export projections. The Bank expects 2.1% growth in both 2018 and 2019, with the economy close to capacity.
There are limits to the improvement. Lower commodity prices, transportation constraints and competitiveness challenges still weigh on investment and exports. The Bank will watch whether the agreement produces actual spending and confidence, rather than assume the announcement immediately changes business activity.
September CPI is 2.2% after the summer airfare spike reversed, and core measures are around target. Housing and credit are adjusting to higher rates, with borrowing vulnerabilities easing in some respects but remaining elevated. The Bank raises the target to 1.75% and says it needs to move toward a neutral setting. The pace still depends on trade developments and how indebted households respond; mortgage planning should allow for that uncertainty.
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.
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, October 24, 2018. The national policy decision does not, by itself, establish a change in Greater Sudbury property values.
For context, compare the September 5, 2018 hold at 1.50% with today’s decision.
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