Bank of Canada Holds Steady on Key Interest Rate
Recent stories about turbulence in the sub prime mortgage market south of the border may have left some Canadian homebuyers wondering what their best mortgage options are.
This week, Canada’s central bank held interest rates steady, abandoning its July rate tightening and adopting more of a wait-and-see approach after a volatile summer in the financial markets.
As expected, the Bank of Canada left its target for the overnight rate — what the major banks charge each other for overnight loans — unchanged at 4.5%.
Under normal circumstances, analysts say, the bank would hike rates again, as inflation is still running above its two per cent target, but analysts said the central bank now thinks that the turmoil and caution in the markets will keep the economy from overheating. Economists at RBC and BMO are among those who see the Bank of Canada leaving rates unchanged for the rest of the year, and then resuming rate hikes in early 2008.
The Bank of Canada decision to hold their key rate steady gives a measure of stability for those with floating rates, but whether they hold a variable or fixed mortgage, borrowers should make sure they can comfortably afford the mortgage they choose.
“The key to a successful mortgage experience is carefully considering all your options and buying within your means so that you can sustain your payments,” says Neil Glasberg, president and CEO of Invis, Canada’s largest mortgage brokerage. “Borrowers unsure of which approach is best can fall back on certain time-tested strategies for ensuring they don’t overextend.”
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