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Bank Of Canada Raises Interest Rate to 0.5% At June 2010 Meeting

Only one direction to go!

This morning at its June 1, 2010 meeting, the Bank of Canada raised its key overnight lending rate (the rate at which it lends funds to chartered banks) one-quarter per cent (25 basis points) to 0.5%, its first rate hike in almost three years.

What can we expect? Banks will be increasing their prime lending rates. This is the rate upon which variable-rate mortgages are based, as well as other borrowing products such as personal loans, and some credit cards. The quarter-per cent hike translates into about $12 more per $100,000 of borrowed funds.

One thing to consider if you’re going to be renewing your mortgage or taking out a new mortgage when you buy, is that the lender discount from prime rate has been increasing (best I’ve heard is prime -0.6% lately), which may help make up for this first rate hike. Talk to an experienced mortgage broker and see what your options are.

The Bank of Canada’s move to increase rates comes amid a shaky worldwide recovery and only time will tell if more rate hikes will be necessary.

Bottom line: don’t panic. Rates are still historically low and will likely remain so for the foreseeable future. Mortgage rates have been on a generally downward trend for about 30 years.

The full Bank of Canada news release can be found here.

Tim Ayres – Sooke Real Estate Professional

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Bank Of Canada Cuts Interest Rate to 0.25% At April 2009 Meeting

Snip!

Snip!

To the surprise of many analysts, this morning at its April 21, 2009 meeting, the Bank of Canada cut its key overnight lending rate (the rate at which it lends funds to chartered banks) another half-percent to 0.25%, continuing the trend of historic low rates in an effort to stimulate the economy. Since December 2007, the Bank has trimmed 4.25% off its overnight lending rate, which has had the effect of lowering mortgage rates (especially variable rate mortgages).

Two of Canada’s chartered banks were quick to match the rate cut, trimming prime to 2.25% – a good sign that credit is available and our banks are ready to lend. This should translate into lower variable-rate mortgage products in the coming weeks. If you’re already on a variable-rate mortgage tied to the prime rate, then you’ll get a letter from your financial institution soon, advising you of the change. If you’re lucky enough to have a prime rate -0.85% mortgage, this means that with bank prime being at 2.25%, you’ll be paying a paltry 1.40% on your variable rate mortgage. That’s almost free.

The Bank predicts that fiscal and financial stimulus measures initiated by governments and central banks worldwide have been slower than expected to take hold, and will be holding the 0.25% rate until the end of the second quarter of 2010, barring unforeseen circumstances. All this means that recovery of our economy is going to take longer, starting late next year, with the economy reaching full capacity in 2011.

The full Bank of Canada news release can be found here.

Tim Ayres – Sooke Real Estate Professional

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Bank Of Canada Cuts Interest Rate to 0.5% At March 2009 Meeting

Scissors

Big scissors for a big job!

UPDATE: CLICK FOR THE APRIL 21st, 2009 INTEREST RATE ANNOUNCEMENT

This morning at its March 3, 2009 meeting, the Bank of Canada cut its key overnight lending rate (the rate at which it lends funds to chartered banks) another half-percent to 0.5%, continuing the trend of historic low rates in an effort to stimulate the economy.

Canada’s big five banks were quick to match the rate cut, trimming prime to 2.5% – a good sign that credit is available and our banks are ready to lend. This should translate into lower variable-rate mortgage products in the coming weeks. If you’re already on a variable-rate mortgage tied to the prime rate, then you’ll get a letter from your financial institution soon, advising you of the change. If you’re lucky enough to have a prime rate -0.85% mortgage, this means that with bank prime being at 2.5%, you’ll be paying a paltry 1.65% on your variable rate mortgage. That’s almost free.

The Bank predicts that fiscal and financial stimulus measures should start to take hold later this year and into next to help the economy recover, and hints that rates will remain at this level or may decrease further until excess supply in the economy is taken up.

The full Bank of Canada news release can be found here.

Tim Ayres – Sooke Real Estate Professional

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Bank of Canada Cuts Interest Rate To Lowest Rate In History At January Meeting

SNIP!

SNIP!

Hello Google Searchers! A post about the March 3, 2009 announcement can be found here!

This morning, the Bank of Canada lowered its key overnight lending rate (the rate at which it lends funds to Canada’s commercial banks) to 1%, slashing it a further 0.5% and taking to 3.5% the total amount shaved off the key overnight rate since the current trend of trimming it started last year.

The Bank believes that the Canadian economy will contract 1.2% this year and we will experience two quarters of deflation and expects the economy will start to turn around in 2010, with a healthy growth of 3.8% as changes to policy take hold. The Bank also noted that the lower Canadian dollar will make Canadian commodities cheaper to other countries.

Because the Bank doesn’t foresee core inflation returning to its target 2% until 2011, you can expect interest rates to remain low for all of this year and next.

Canada’s big banks have already indicated that they would be matching the full 0.5% rate cut, trimming their prime rates to 3%. I believe this is a good sign that the availability of credit has loosened up somewhat. In recent months, when the Bank of Canada has made a cut to interest rates, the big banks have been hesitant to match the cut in their prime consumer lending rates, opting to keep the savings to themselves to offset higher credit costs.

As a result, anybody on a variable rate mortgage is now saving more money, and anyone shopping for a new mortgage just increased their buying power. With inventory on the MLS starting to ramp up, this combination is great if you’ve been thinking about buying.

The full Bank of Canada news release can be found here.

For more information and sound advice on real estate in Victoria and Sooke, please contact me.

Tim Ayres – Sooke Real Estate Professional

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Bank of Canada Slashes Interest Rates In December 2008 Meeting

Chop Chop Goes The Interest Rate!

Chop Chop Goes The Interest Rate!

UPDATE JAN 20, 2009: Click Here

In an effort to provide economic stimulus, the Bank of Canada has lowered its key overnight interest rate by 3/4 of a percent to 1.5% in its meeting today. Since the Canadian economy has been effectively hung out to dry by the political three-ring circus in Ottawa, I’m not surprised to see such a deep cut. If Parliament can’t/won’t do anything, then it’s up to the monetary policy makers at the Bank of Canada to provide stimulus to our economy.

Citing worse-than-expected economic performance both in this country and around the globe, the Bank has admitted that we are in fact in recession, but notes that recent fiscal and monetary actions by world governments is starting to have a positive effect on financial markets, however more time is needed for things to stabilize.

The trimming of the key rate provides a 50-year low in borrowing costs in Canada.

As with any rate cut by the BoC, it remains to be seen whether or not those savings will be reflected in the Big Five banks’ prime lending rates, currently at 4.0%.

Assuming the banks adopt the Bank’s drop in lending rates, and with the recent decline in real estate prices, sidelined buyers may just decide it’s a good time to enter the marketplace.

The Bank of Canada next meets on January 20th, 2009 to set the overnight rate. You can read the full Bank of Canada news release here.

If you have any questions about mortgages or about buying or selling real estate, please call me at 250-885-0512 or use the following link to contact me.

Tim Ayres – Sooke Real Estate Professional

Your comments are welcomed and encouraged!
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Bank Of Canada Holds Fast on Interest Rate – June 10th, 2008

Update: December 9th, 2008 Rate Announcement

The Bank of Canada surprised most economists in this country by this morning declaring that they would Bank Of Canadanot change the key overnight rate from its current 3%. This is the rate that is used to lend funds to financial institutions across the nation, who in turn lend funds to consumers. Typically, when it drops, banks will also decrease their rates for adjustable-rate mortgages. When it increases, consumers will see a rise in their rate.

The Bank cited better-than-expected global economic growth, which has offset the lessening demand for Canadian goods in the United States. Record high commodity prices (hello, $130+ oil!) have helped to push the Bank’s forecast for total CPI (consumer price index) inflation to more than 3% for 2008. The Bank’s goal is to maintain core inflation at 2%. They state in their release that the Canadian economy is operating in a state of excess supply (less demand for our goods, most notably from the U.S.), which should balance out inflation to keep it at 2% this year. The Bank foresees steady economic growth over the next 2 years, and will monitor inflation closely to keep it in check.

My interpretation is that we won’t see another rate cut for awhile. If the Bank feels that inflation is being held in check by global economic conditions, then they probably won’t increase the rate in the near future. This is good news for buyers, and home owners with adjustable-rate mortgages. My monthly payments have decreased by over $100 in the last year with these rate cuts.

Your comments or questions are welcomed and encouraged!
Use the reply box below this post!

Tim Ayres


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Bank Of Canada Slashes Key Interest Rate by 0.5%

UPDATE: JUNE 10 INTEREST RATE ANNOUNCEMENT POSTED HERE

April 22nd, 2008

In keeping with its mandate to keep inflation in Canada at the 2% target, the Bank of Canada todayBank Of Canada announced that it was lowering its overnight lending rate by 50 basis points (one-half per cent) to 3%. Citing deepening economic woes in the U.S., tightening credit conditions, and overall instability in the world economy, it’s hoped that this economic stimulus, along with strong domestic demand and high employment, will help keep Canada’s economy performing well.

The Bank forecasts that Canada’s economy will grow by 1.4% this year, 2.4% in 2009, and 3.3% in 2010 when the Bank also projects that inflation will reach the target 2%. The overnight rate has been lowered 150 basis points (1.5%) since December of last year.

The press release hinted that this may be the last of the rate cuts for a while – the timing of any further monetary stimulus will depend on global conditions and their effect on Canadian inflation.

This news is positive to anyone on a variable-rate mortgage, which is tied to the central bank rate. Fixed-rate mortgages are slower to come down, but should fall into line with the rate cut. With more and more choices on the market than in recent years, buyers are in a good position to extend their purchasing power and get into their perfect place.

The Bank’s next meeting to discuss interest rates is June 10, 2008.

Read the full Bank Of Canada press release here.

Tim Ayres


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Bank Of Canada Expected To Cut Interest Rates

UPDATE: APR 22, 2008 RATE ANNOUNCEMENT

Don’t forget, the Bankof Canada meets tomorrow, April 22nd, 2008. The Bank is expected to cut interest rates by another 50 basis points (0.5%) to generate some stimulus in the weakening economy. This is of course great news for anyone on floating rate mortgages and buyers of real estate. With MLS listings at numbers we haven’t seen in years, buyers have more choice than ever when looking for that perfect place.

Be sure to check back tomorrow to see my post about the rate change meeting and my commentary.

Tim Ayres


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