Interest rates on select variable rate mortgages have fallen below the 2% mark again in what might be an attempt to maximize sales before another possible rate hike this month.
2017 has been a year of record low mortgage rates, but after the Bank of Canada raised the key interest rate two times this summer, it seemed like mortgage rates had nowhere to go but up. However, some mortgage lenders are capitalizing on the increased home buying activity of fall, as well as the uncertainty of another rate decision in two weeks, by pricing their mortgages lower than the competition.
How likely is a third rate hike on October 25? Bank of Canada governor Stephen Poloz has been less likely than his predecessor to foreshadow policy changes — the second rate hike in September was a surprise to many, as was his first rate cut in 2015.
The last two rate hikes were preceded by overwhelmingly positive economic indicators. Now, growth is starting to show signs of slowing down. It’s no cause for concern, but the BoC could choose to be more cautious because of it.
At the same time, the Bank of Canada is weighing the negatives of keeping interest rates historically low. Concerns continue to grow around the speculation of housing prices in cities like Toronto and Vancouver, while Poloz himself has said that the Canadian economy no longer requires major stimulus.
Regardless of the speculation, mortgage brokers in Ontario have trimmed back mortgage rates significantly in the past two weeks. Our data shows that the lowest rate offered in the province has gone from 2.13% just two weeks ago to 1.99% as of Monday.
After being surprised by last month’s rate hike, some economists think the BoC will attempt to match the U.S. key interest rate of 1.25% as soon as this month. According to The Financial Post, a Bloomberg survey found the majority of economists are leaning towards another rate hike on October 25. A few months ago, those same economists predicted that it would be August 2018 before it reached that level.
If the economists are right, it is a smart move on the part of mortgage lenders to offer their lowest rates in the weeks before they have to raise them again.
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