Bank of Canada announced today that they would keep the overnight lending rate at 1%. Projections that Prime would increase in mid 2015 are now being postponed by another 6 months until the end of the year.
The rate of inflation determines the overnight BOC rate and inflation is currently sitting around 1%. As the economy strengthens, inflation gets higher and so will the overnight lending rate.
Poloz, head of the central bank had hoped for exports and investments to drive up the economy. Neither has preformed well enough to strengthen Canada’s growth. A possible fear for the bank is more debt due to the low cost of borrowing.
What does the BOC rate stability mean in terms of your mortgage payments? Well, prime has been steady for over 3 years. For variable mortgage holders or those with a home equity line of credit this is great news. It means that you can continue to enjoy your low monthly payments and pay off your mortgage faster as you are paying less interest.
This will definitely increase demand for VRM mortgages for those that qualify. Depending on the lender you would be looking at variable rates anywhere from prime to prime -0.5.