The Bank of Canada has announced that they are keeping the overnight rate at the record low of .25% for now but sent a strong message that rates will be going up sooner rather than later. Expectations that the Bank will raise rates on June 1st have sent the Loony up even higher, surpassing the US dollar.
The dollar jumped 1.58 cents to $1.0012 (U.S.) as investors bet interest rate increases in Canada will outpace those in the United States, where the Federal Reserve shows no signs of boosting rates any time soon.
With the timeline for a rate hike nearly set in stone, investors and economists are turning their attention to how fast rates will move.
Policy makers will end this year with a lending rate of 1.5 per cent, many economists believe, moving to between 2.5 and 3.5 per cent by the end of next year.
The level that most economists consider “neutral” is 4.5 per cent.
If you’ve got a variable rate mortgage now might be a good time to lock in. If you’re over-extended now might be a good time to sell. I suspect “neutral” rates won’t have a neutral effect on Vancouver house prices at this level.