Bank of Canada April Interest Rate Announcement

Bank of Canada April Interest Rate Announcement

Homeowners and property hunters across Canada waited to see whether the Bank of Canada would shake up its interest rates. However, the April 10, 2024 announcement confirmed what most experts already knew—the overnight lending rate will stay at 5%. 

Our recent 2024 interest rate predictions post highlighted the likelihood of this happening despite many hoping the rates would fall. 

What does this mean for people in Canada? More importantly, how will the rate announcement impact your mortgage options? 

Find out here as we dive into the implications of a 5% interest rate hold. 

April 10, 2024 – Bank of Canada Announces Steady Hold at 5%

The Bank of Canada announced its interest rate hold in a statement, emphasizing its policy of quantitative tightening. Many hoped things would be different due to the February inflation report, which revealed a Consumer Price Index of 2.8%. 

The Bank of Canada’s target is 2%, signalling an apparent reduction in inflation rates. However, mortgage interest costs and shelter are the most significant contributors to CPI rates, and the bank wants to see more improvements before officially cutting interest rates. 

Will the Interest Rates Fall?

Despite this being the sixth consecutive hold in interest rates, there’s still hope they’ll decrease in June. Some positive changes show that the Canadian economy is stabilizing, but unemployment rates remain high (Bloomberg). 

Tim Macklem, the BOC’s governor, stated that the inflation rates are promising, but lowering the bank’s rates is a significant decision that could impact the economy. If these rates continue to fall, there’s a good chance the Bank of Canada will reduce its interest rates by June 2024. 

Macklem previously stated that 2024 would be a transitional year for interest rates – but for now, the rate hold will inevitably frustrate some people (CBC). 

Benefits of An Increase in Interest Rates

While many people want to see interest rates decrease, others focus on the benefits higher rates offer. They include: 

  1. Growing Savings Accounts: People with access to low-interest loans and credit cards are less likely to save money, as it’s easy to borrow. However, high interest rates require a more conservative approach to saving money, resulting in a better return on tax-free and high-interest savings accounts. 
  2. More Real Estate: Canada is one of the most competitive places to buy a home, with many people trying to secure a property. When the interest rates are higher, fewer people will search for property, making it easier to move into densely populated cities. 
  3. Tamed Inflation: Inflation rates are a balance of supply and demand. When the rates are higher, consumers are more likely to cut back on non-essentials, decreasing the rates and possibly returning to their previous levels. 

Benefits of a Decrease in Interest Rates

A decrease in the Bank of Canada’s interest rates would offer many benefits for consumers and homeowners. They include: 

  1. More Spending: Low interest rates enhance loan, mortgage and credit card accessibility. When people can afford a home, construction and other industries are strengthened as they receive more investment. 
  2. Less Debt: Homeowners with variable interest rates can save money by paying off other debts and focusing on their savings accounts. Over time, this will result in less spending and boost investments. 
  3. Stronger Economy: When people can access loans and other financial products to enhance their futures, the economy strengthens. 

Bank of Canada Interest Rate Implications on Victoria Mortgages

Our 2024 mortgage interest rate predictions explore what might happen over the course of this year—but how will the 5% interest rate hold impact Victoria mortgages? 

It depends on whether you have a fixed or variable-rate mortgage, as the latter is fully dependent on the Bank of Canada’s interest rates. However, people on fixed rates are protected for the duration of their initial mortgage agreement. 

Whether you’re a first-time buyer, preparing to renew your mortgage, or selling your home, the rates might impact your options.

For First Time Homebuyers

There are many things for first-time homebuyers to consider, including whether the 5% interest rate hold will benefit them. Lower rates make the housing market more accessible for first-time buyers and mean they’ll often make lower monthly payments, which is a huge benefit. 

In contrast, lower interest rates also mean there’s more competition, which might impact first-time buyers. With fewer options for a suitable mortgage, some people will have to turn to rental properties, compromising the freedom homeownership offers. 

However, a hold in interest rates means many people might delay looking for a property, and first-time buyers could have a competitive edge. 

For Mortgage Renewals and Transfers

People on fixed-rate mortgages might also experience issues associated with the 5% interest rate hold. If you’re at the renewal stage or want to transfer your mortgage, it could impact your options. 

  • Renewals: The hold in interest rates means homeowners might not find a great deal when they need to renew the mortgage.
  • Transfers: If you want to transfer your mortgage to a new property, you might find the interest rates limit the terms.

The best way to avoid issues is to research your options in advance and negotiate with different lenders. Your current mortgage will have portability terms, which can help you make the best decision for your needs. 

For Those Selling Their Homes

While higher interest rates limit housing market activity and low rates create a surge, the 5% hold will likely mean there are few changes in housing demand. If you plan on selling your home, the hold could result in less buyer interest. 

However, some buyers want to take advantage of less competition, and selling a property is still possible. A dynamic pricing strategy can help you attract prospective buyers and generate offers. 

Book A Consultation With A Top Victoria BC Mortgage Broker

We hope to see the economy stabilize and Bank of Canada interest rates decrease in the future. However, the rate hold doesn’t mean you need to put your plans on hold; a top Victoria, BC, mortgage broker can help you find a mortgage deal that aligns with your needs. 

Prime Mortgage Works has access to a range of specialist lenders. Working with us gives you access to better interest rates and terms. Please get started today and discover our extensive network of lenders. 

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