With anxiety mounting throughout March as the economic impacts of the COVID-19 pandemic intensified, Canada’s central bank took swift action to slash interest rates at several points during the month.
The Bank of Canada announced a cut, the cut would focus on the overnight rate, the overnight rate is what influences mortgage rates, and it has reached a level that has not been seen since 2008's global recession. The overnight rate currently is at 0.25 per cent, which is sitting under an "effective lower bound" which is established by the bank, this means that the bank does not intend to lower it even further to zero or negative.
In a comprehensive housing report published earlier this month, BMO Senior Economist Robert Kavcic wrote that the central bank is unlikely to hike the rate until 2022.
In his report, Kavcic talks about how there were rapid cuts to the overnight rate. This has led to five-year fixed-rate mortgages to decline, they are declining so dramatically that they are comparable to that of the 2008-2009 period. Currently. According to Kavcic, rates are available in the 2.4 to 2.6 per cent range, this is 50 points lower than last year, and to compare, last year's overnight rate was still very low compared to the history of Canada.
At the moment, the next time we will see change is June 3rd, as the Bank of Canada's next scheduled interest rate announcement is due by then.
On June 3rd, Tiff Macklem will be granted the role of governor, what is great about this is that Macklem was associate deputy minister in the Department of Finance during the 2008-2009 financial crisis. This is a very great change in leadership as we will have a governor who has had experience with a major downfall in an economy.
However, the one thing that is definitive is the fact that mortgage rates will continue to stay very low for a couple of months or even a few years.
If you would like to learn more about why and how mortgage rates in Canada will remain historically low for an estimated two years, or if you are thinking about buying or selling your properties, please contact Matt Gul, who is a top luxury real estate agent situated in West Vancouver, who can help you with all of your needs. To contact Matt Gul please call him at 778.888.8888 or email him at email@example.com
Summarized by: Onur Gul on Instagram at @onurgulfilm