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Bank of Canada Rate Decision Disappoints Variable-Rate Mortgage Holders

Strategic Insights

— 1 min read

The Bank of Canada's decision to maintain interest rates at 2.75 per cent this week will likely come as a disappointment for variable-rate mortgage holders. Despite the hold, senior economist Robert Kavcic is still optimistic about the outlook for variable mortgage holders, predicting that the Bank of Canada rate will drop three more times to reach 2 per cent by 2025. Meanwhile, long-term fixed mortgage rates are expected to rise, driven by bond market volatility and lender responses to stock market uncertainty.

Key Takeaways:

  • The Bank of Canada's interest rate decision will likely disappoint variable-rate mortgage holders, who had hoped for a rate cut to bring their rates in line with five-year fixed mortgage rates.
  • Robert Kavcic, senior economist with BMO Capital Markets, predicts that the Bank of Canada rate will drop three more times to reach 2 per cent by 2025.
  • Long-term fixed mortgage rates are expected to rise, driven by bond market volatility and lender responses to stock market uncertainty.
  • Homeowners with the ability to handle the risk associated with a variable mortgage could benefit in the current environment, while those opting for a long-term fixed rate may see their rates increase in the short term.
  • Ratehub.ca has reported that mortgage rates sourced from various lenders are headed for an uptick, with some lenders such as Nesto already moving their rates slightly higher.

Statistics:

  • The Bank of Canada's interest rate is currently set at 2.75 per cent.
  • Robert Kavcic predicts that the Bank of Canada rate will drop three more times to reach 2 per cent by 2025.
  • Long-term fixed mortgage rates are expected to rise, with some lenders already moving their rates higher.
  • Bond market volatility has led to an increase in mortgage rates, with some rates rising by 0.3-0.5 percentage points.

Sources:

  • "Toronto mortgage broker, Mortgage broker salary, mortgage rates, buy a home in Ontario, mortgage rates history" - Ratehub.ca
  • "Bond markets have been moving up in response to uncertainty in the stock markets, and some lenders such as Nesto have already responded by moving their rates slightly higher." - The Globe and Mail

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