There’s no doubt that the Canadian economy is anything but stable right now. With oil prices continuing to hover at or below 50 dollars US per barrel (less than half of where they were was last summer), many sectors of our economy continue to drag, especially in the hardest hit regions like Alberta.
The Bank of Canada decision to drop it’s overnight lending rate, in January, coupled with very low bond yields, has sparked a mortgage rate war in Canada as the major banks are competing more fiercely for mortgage loans. All of this is happening as we head into the spring real estate season, when home buying appetite tends to peak here in Ottawa and across the country.
Nationally, Our Economy is Sputtering
Our national economy is sputtering, evidenced by the latest economic figures for January, which showed that Canada’s economy contracted by 0.1% in the first month of 2015. This slowdown is less than what some analysts predicted; but nonetheless, it does raise concerns for all types of investors in the confidence of the Canadian economy:
Indeed, some economists were prepared for the worst in the January report, after Bank of Canada Governor Stephen Poloz said in an interview published this week [end of March] by British newspaper the Financial Times that first-quarter economic growth “will look atrocious.” Globe And Mail
Bank of Canada Governor Has Everyone’s Attention Right Now
Poloz’s comments sparked some controversy and raised some eyebrows in question period on The Hill last week. His actions in January caught many analysts by surprise, when the Bank of Canada lowered its key overnight lending rate (that rate at which banks borrow from each other) to 0.75%. Only a few months earlier, many experts were predicting that the Bank of Canada would likely need to raise the key rate in 2015, to help cool an overheating housing market; however, few were predicting that oil prices would go so low, so fast and for so long.
A Mortgage Rate War Has Been Declared in Canada
RBC, was the first major lender to lower its five year fixed rate to 2.84%, following the Bank of Canada rate cut. BMO took things even further in the month of March, signaling that we are indeed entering into a mortgage rate war, by dropping the 5-year rate for its promotional “Smart Fixed Mortgage” to 2.79%, a new low for the industry:
The 2.79 per cent rate is the lowest-ever posted five-year mortgage rate from one of Canada’s Big Banks, said Penelope Graham, editor at RateSupermarket.ca… Canada’s other big banks quickly followed suit… TD Canada Trust quickly matched the move, lowering its five-year fixed rate to 2.79. Toronto Star
Ontario in a Good Position to Weather the Storm
The increased competition for mortgage loans, using mortgage rates as a key differentiator, will benefit homebuyers in provinces like Ontario, where we are relatively insulated from the negative economic impacts of low oil prices. In fact, the Bank of Canada rate drop has also placed downward pressure on the Canadian dollar, which boosts manufacturing by making our exports cheaper to buy, thus helping to fuel our manufacturing industries in Ontario.
Spring is finally making its way to the National Capital Region, evidenced by warmer temperatures and the enthusiasm of new developments like Lebretton Flats (the Sens could actually be playing downtown) and the eco-friendly redevelopment of the old Domtar site on the Gatineau side of the Ottawa River. With mortgage rates so low, there’s never been a better time to buy a home in Ottawa!
Hatch is a Mortgage Broker in Ottawa that will Help You Save!
As your online mortgage specialist, Hatch will help you get the best rates. We currently offer a 5-year fixed mortgage for an amazingly low 2.33%. We can do this because of our low overhead (operating online can be very efficient) and because we cut out the middlemen. All the while, we still provide the expert guidance of a licensed mortgage broker with almost 30 years experience. Fill out our online mortgage application to see how much you can save on your new mortgage, or when refinancing your current mortgage.