The Bank of Canada announced last week the need to wait before continuing to increase interest rates. The Bank had previously been insistent that continued rate hikes would be necessary in order to keep inflation in an acceptable range, but doing so did not have the desired affect.

In 2018 Canada’s year-over-year inflation rate was 1.4%, a far cry from the optimal 2.2%. Alberta in particular had the weakest inflation rate in the country at 1.2%. Which is saying something considering the deflation rates we had in November (-0.5%) and December (-0.1%). In January we hit 0%.

The Bank of Canada had implemented 5 interest rate hikes between July 2017 and October 2018, but have halted all movement since then. “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,” they said in last week’s announcement. Because of this, they have softened their stance on continued hikes to the overnight rate. The economic slow down at the start of 2019 was “sharper and more broadly based” than expected and “it now appears that the economy will be weaker in the first half of 2019 than the Bank projected in January.”

This may have many Canadians worried, but there is some good news for existing and potential home owners. “The softening rate outlook will put downward pressure on bond yields, causing fixed rates to drop as we enter the spring homebuying market,” said president of CanWise Financial,James Laird. “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.”

Plus, according to the Regulator for the Office of the Superintendent of Financial Institutions (OSFI) the stress test seems to have worked “too well.” Does this mean people looking to buy a home won’t have to deal with the mortgage stress test much longer? We shall see.

To find out how the current (and future) Bank of Canada rates affect your current (or future) mortgage, contact us today.