The final Bank of Canada announcement for 2023 has arrived. For the fifth time this year, the Bank of Canada has opted to maintain its overnight rate at 5%. Will this trend continue into 2024 and beyond until inflation is closer to their target of 2%? Many are making this prediction, however, only time and further evidence will reveal if this pause continues and becomes our new reality.
Understanding Your Mortgage’s Future: Predictions vs. Reality
Today’s Bank of Canada announcement is more than a mere economic indicator; this pause marks a pivotal moment that could be the turning point in the mortgage landscape. Despite today’s news, the persistent increase in living expenses remains a significant burden for many families with many questions on the mind of Canadians everywhere. How will any upcoming changes affect my mortgage payments? When can we expect a drop in interest rates? For those with a mortgage renewal in the next 3-6 months, what’s the most effective strategy? While seeing into the future isn’t possible, understanding the current landscape is crucial for making informed decisions.
Imagine you’re a big fan of hockey. And since our head office is located here in Alberta’s capital city, let’s also imagine your favourite team is the Edmonton Oilers. At the start of the 2023 season, you predict that they’re going to have a fantastic year. You base this prediction on their strong lineup, past performances, and the skills of their star players. This is like making a “prediction” in economics, where experts try to guess future trends, such as the Bank of Canada’s decisions on interest rates.
As the season progresses, however, let’s say the Oilers face unexpected challenges. Maybe they encounter stronger-than-expected opponents, key players get injured, or they just have a run of bad luck in some games. Despite your initial prediction and the team’s potential, they don’t perform as well as you hoped. This outcome is the “reality” – it’s different from your prediction, and it shows how even with all the right elements in place, unexpected factors can change the course of events.
Just like in hockey, where a season can have unexpected twists and turns, in the world of economics, experts can make educated guesses about things like interest rates, but the actual outcomes might differ due to unforeseen circumstances. So, in this ever-changing economic landscape, partnering with licensed mortgage brokers, is more crucial than ever to navigate these uncertainties and secure the best possible mortgage solutions.
Wondering why mortgage rates can differ so much? Our latest episode of ‘Asking For A Friend’ decodes a few of the mysteries behind those rate variations. From down payments to equity, it’s a wild financial ecosystem out there! A short 4-minute video will help better equip you to navigate it like a pro.
Finally, understanding the Bank of Canada’s next moves, amidst fluctuating economic indicators and policy decisions, is key to forecasting the impact on your mortgage repayments. As we await further evidence to see if these predictions hold true next year, the question of when interest rates will decrease looms large. Indeed, deciphering these economic trends is akin to seeing into the future; it requires careful analysis of the present and an informed guess about what lies ahead.
Press release | Ottawa, Ontario: Bank of Canada maintains policy rate, continues quantitative tightening: December 6, 2023 – The Bank of Canada today held its target for the overnight rate at 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening.
Read the full Bank of Canada Press Release here: Interest Rate Announcement
The Bank carries out monetary policy by influencing short-term interest rates. It does this by adjusting the target for the overnight rate on eight fixed dates each year. Here’s the schedule for 2024:
Source: Bank of Canada
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