The Bank of Canada maintained an overnight rate of 1.75 percent this January. This has been a relief to many homeowners. In the past, rising interest rates in 2019 were expected, but it seems now that the Bank is willing to start the new year in a new (and more cautious) direction.
The Bank of Canada monitors the economy to adjust the overnight rate. This time, global conditions such as oil prices and economic expansion have affected their decision. For the Canadian economy, the Bank states that “these developments are occurring in the context of a Canadian economy that has been performing well overall. Growth has been running close to potential, employment growth has been strong and unemployment is at a 40-year low.”
Housing investment has been weaker than expected thanks to changes to mortgage guidelines, provincial measures and higher interest rates. All these adjustments to the Canadian housing market have been recent, and so, the market is taking longer to stabilize than previously expected. And the Bank assures that they will continue to place close attention to these factors in the future.
The Governing Council remains insistent on the need to raise interest rates to a more neutral rate. But “the appropriate pace of rate increases will depend on how the outlook evolves, with a particular focus on developments in oil markets, the Canadian housing market, and global trade policy.”
We’ll see what the Bank has in store in March’s rate announcement.
So what can you do as a homeowner or future home buyer?
Interest rates might remain steady or go up. It’s just a matter of which factors are affecting the economy at the present moment. However, that doesn’t mean you can’t take action to ensure a secure financial future.
Interest rates influence borrowing costs to those in real estate, and many Canadians are seeking debt relief. This recent announcement to keep the rate unchanged will help, but there are other steps you can take.
First, don’t take more than what you can borrow. Your level of debt should be kept at a reasonable level, and your spending should be moderate. And every time you borrow money, you have to be sure to leave some space to build up your cash savings. Good savings can be a game changer when interest rates hike. To save on interest rates in the long run, shop around for mortgage rates and don’t be afraid to negotiate. Another alternative is to go for accelerated payments.
There is no reason to be discouraged if interest rates rise. Homeownership is achievable in today’s housing market. All you have to do is be smart during the home buying process. Start your search today with Homicity.