Over night rates and the BOC

Mark Carney.

Here is guy who has a hug influence on Variable Rates in Canada.

For those of you not in the know, he is the the governor of the Bank of Canada. Appointed on October 4, 2007, Carney began his seven-year term as the Bank's eighth governor on February 1, 2008. At the time of his appointment, Carney was the youngest central bank governor among the G8 and G20 groups of nations.
Carney's actions as the Bank of Canada's governor are said to have played a major role in helping Canada avoid the worst impacts of the financial crisis.

When he speaks, we listen to say the least.

On Monday of last week, Mr. Carney spoke to the Canadian Club of Ottawa.

Mark's presiding theme was that the world’s economies are realigning. He believes with emerging markets now accounting for nearly three quarters of the world’s economic growth, there is concern about Canada’s reliance on the United States as its primary export market.(we only send 10% of our exports to emerging markets).

He reminded us that recessions caused by financial problems are more severe and last twice as long as other recessions. Words to take to heart.

He was then quoted as saying “any further reduction in monetary stimulus would need to be carefully considered.” In other words, the BOC will think long and hard before raising their overnight rate.

Now if you noticed late last week lenders continued to inch their fixed-mortgage rates downwards last week. Most dropped them by an average of 10 basis points (0.1%) while the five-year Government of Canada bond yield finished the week lower. The belief that rates are headed nowhere but up seems to be softening, which is always nice.

Variable-rate discounts didn't change and with posted mortgage rates dropping this week, the Mortgage Qualifying Rate should drop to 5.59% today, hopefully. This will make it a little easier to qualify for variable-rate financing.

And now the bottom line....

The Economists who were calling for summer rate hikes will revise their estimates, and will suggest that a fall rate rise is more likely than the one being forecast for July.

This is great for variable-rate mortgage borrowers.

And considering BC specifically, we are 85-15 in favor of Variable to Fixed rates.

Just thought I would throw that out there.

There is a lot of valuable information on my website in regards to making an INFORMED decision on which type of rate to choose. Have a read www.kevynoyhenart.ca

Until tomorrow...

Kevyn