What BC Southern Interior Buyers Need to Know About the September 2021 Bank of Canada Announcement Regarding Borrowing Rates
It’s “back to school” week across BC! All over the province parents, households, and teachers alike are scrambling to adjust their schedules and are planning for the season ahead. Amidst the chaos, the Bank of Canada just made their own scheduled announcement, about borrowing rates. New buyers are left wondering if their plans to get a mortgage before the year comes to an end is still viable. Have things changed since the Bank of Canada’s midsummer press release? Is it still the best time in recent history to buy a home in the Southern Interior? Let’s find out.
No Surprises Here Folks, The Policy Rate Stands Still
As we expected, on September 8 the Bank of Canada announced that they would keep the policy rate as is, at .25%.
Some buyers, investors, and even a few experts thought that there may be an uptick in the overnight rate. However, those predictions for the September announcement were made back when it looked like life was finally returning to normal. Remember June and July? Seems like a long time ago now.
Yes, global economic growth (including that of our neighbors to the south) is occurring which points to positive things to come. However, Canada’s economy keeps getting punched in the face. While this may sound like bad news – those who have been following our blog know that it’s not. For buyers, the sustained interest rate is great. Prime rates have a direct impact on variable mortgage rates. An increase in the overnight rate triggers variable mortgage rate increases, and in following that design, a static overnight rate keeps variable rates in a holding pattern (all else equal). As you may or may not know, variable rates have been hovering at record lows all summer long, so anything that keeps these rates where they are is music to the ears of new buyers.
To reiterate, variable rate mortgages are as attractive as they’ve ever been. Subscribe to the Carloni report for mortgage rate updates.
What about fixed rates, in light of the Bank of Canada announcement? Fixed interest rates (such as the popular 5-year fixed rate) are not impacted by the overnight rate. Instead, they are dictated by Bank of Canada purchases in the bond-market. This year, the Bank of Canada has been bolstering the market by pouring billions of dollars into bonds, and have been pledging to keep doing so in order to keep fixed interest rates low. The Bank announced on Wednesday that it will continue buying bonds at a pace of $2 billion per week. For the uninitiated, that cool two billion is what is required to maintain fixed mortgage rates at or near their all-time low.
To review, fixed rate mortgages are also as enticing as they’ve ever been. Subscribe to the Carloni report for mortgage rate updates.
This week’s Bank of Canada announcement is all about supporting consumer spending. They are encouraging households from Penticton to Prince Edward Island not just to spend, but to invest. And there is no better investment to make right now than in real estate. This period will be looked back on as one of the most opportunistic moments in history, especially here in the BC Southern Interior where the real estate market is hot. Home equity and future resale values will rise for years if not decades to come, and those who entered the market when rates were so low will have reaped the rewards. Those who wait it out? Not so much. Don’t kick yourself in five or even just two years from now. Take advantage of this once in a lifetime opportunity. All you need to do to get the ball rolling is get pre-approved or simply give us a call to discuss your options.
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