After cutting the lending rate twice in 2015 to encourage lending and boost Canada’s economic prospects. The decision by The Bank of Canada to hold their lending interest rate at .5% is an indicator of the future.
The prime rate is now at 2.7% for the foreseeable future. The choice to hold the lending interest highlights the potential for growth. Which The Bank of Canada sees in the Canadian economy, as their latest figures project 1.5% growth in 2016 and 2.5% growth in 2017. For homebuyers looking to the spring marketplace as a time for buying a new home, this post will highlight the spring forecast for Canada’s prime rate.
Employment Figures Point to Improving Economy
When considering the prime rate forecast and the decision to raise or lower the lending rate, the Bank of Canada will look closely at employment figures across the country. The latest employment figures paint a rosy picture of the strength of Canada’s economy, particularly in Ontario. In January, Ontario added almost 20,000 new jobs in sectors such as education, trades, food services, and accommodation.
The latest data also shows that the average hourly wage of a worker in Canada has increased 2.8% since the same time in 2015. Bank of Canada officials will gain confidence from this figure as it indicates that the purchasing power of the average Canadian worker is set to increase this year. They will be looking for further improvement in this level to help offset the average Canadian’s high debt levels.
Low Oil Prices Could Leave Prime at 2.7%
While there is greater confidence in the overall Canadian economy in recent months. The lowering oil prices have led to caution within the Canadian banking sector. Many lenders are now expecting oil prices to remain low throughout 2016. Thus, making it highly unlikely the prime rate forecast will rise beyond 2.7%. Lenders will look to maintain housing and financial strength amid challenges in the commodities marketplace.
The Bank of Canada’s next interest rate announcement is scheduled for March 9. In the intervening weeks, it’s highly unlikely there will be any significant changes that impact the current consensus. This means that Canadians entering the home buying process this spring can look forward to interest rates based on a prime rate of 2.7%. Resulting in a welcoming lending environment.
To discuss the prime rate forecast and potential changes to the rates in the coming months. Contact our team today at: http://www.mortgages.ca/contact