After yesterdays Bank of Canada rate cut we’re seeing lots of articles about what this means for the housing market.
Reasonably enough economists are predicting a dip in mortgage rates after this cut, but so far the big banks don’t seem to be in a hurry.
However, TD Bank was quick to announce Wednesday it will maintain its prime interest rate at three per cent, noting that factors beyond the central bank influence its rates.
“Not only do we operate in a competitive environment, but our prime rate is influenced by the broader economic environment, and its impact on credit,” the bank said in a statement.
And the Royal Bank appeared in no hurry to drop rates either, saying in an email response to a query that “while we don’t have any product announcements to make at this time, we are considering the impact of today’s Bank of Canada decision.”
It was anticipated that the Bank of Canada would move to increase its overnight rate later this year due to an improving economy, until crude prices started to slide and dropped below US$50 a barrel.
Phil Soper, president of realtor Royal LePage, predicted Canadians could be shopping for cheaper mortgages within days.
“It doesn’t take long to react to a policy change like this,” Soper said. “That’s why it’s such a powerful tool.”
Read the full article over at Yahoo.
If you’ll recall you’ve been warned many times by a number of government talking heads that rates could go up at any time.
Today the Bank of Canada finally took action and cut rates by a quarter from 1% to 0.75%.
Speaking to reporters, Mr. Poloz said the oil price drop is “unambiguously bad” for the Canadian economy, prompting the bank to take out what he called an “insurance policy” against future risks, such as weak inflation and a household debt squeeze. But he denied the move was calculated to send the Canadian dollar lower.
“Market consequences will be what they are,” he said.
The rate cut sent the loonie plummeting below 81 cents (U.S.).
Mr. Poloz, who acknowledged that oil dominated the bank’s discussions leading up to Wednesday’s rate decision, said he’s ready to cut rates again if prices fall further.
“The world changes fast and if it changes again, we have room to take out more insurance,” he said.
The rate move, which few analysts anticipated, is an attempt by Mr. Poloz to shield highly indebted Canadian households from an oil-induced hit to their jobs and incomes – signs of which are already evident in Alberta.
In the comments section here, Dave asked the question: How much of the BC economy is tied to Oil and Alberta?
I would like to know how much of a hit the damage to Alberta will be to BC. It seems to me that everybody underestimates the economic impact. I think our statistics don’t capture the role of Alberta in our economy. I think I read that Westjet estimated 5,000 people in the Okanagan work in the oil patch. And that’s just them trying to estimate things for their benefit (i.e. people who buy plane tickets). How many work from home on their computers? Or only make a few trips per year and don’t get picked up the radar? How many work in the Okanagan but for companies that service the oil patch? Add it all up and there is a LOT of employment related to Alberta.