As expected, the Bank of Canada maintained their overnight rate in their first scheduled rate announcement of the year. It’s now been six months since the last hike. The BoC remains concerned about inflation risks, however, they are still expecting to reach their inflation goal of 2.00% at some point in 2025. They have stated on numerous occasions that they are not prepared to lower their rate until they are convinced that they’ll achieve this goal.  

 

Timeline for Expected Rate Cuts  

Despite last week’s disappointing inflation surprise, economists are expecting to see the first cut from the Bank of Canada this spring, which could come as soon as April 10th. However, they’ll be watching inflation very closely. If it continues to remain ‘sticky’, then it’s possible that rate cut forecasts could be pushed out further. Fortunately, economists are sounding optimistic about their predictions.  

The Bank of Canada has continually stated that they are prepared to increase their rate further if needed. While they haven’t officially ruled out further hikes, they have removed this suggestion from their press release, which is quite promising. Their focus now seems to be on how much longer they’ll need to hold the current rate, rather than considering additional hikes.  

In a press conference held in Ottawa this morning, Bank of Canada governor Tiff Macklem said the following when asked when the cuts can be expected: “We know Canadians want to see interest rates come down. So do we.  We want to be convinced we’re on a path back to two percent inflation. When we have more assurance that we’re on that path, we can start discussing lowering interest rates… but we’re not there yet”.   

 

Fixed Mortgage Rates Increasing  

Despite the Bank of Canada holding their rate this morning, upward pressure remains on fixed mortgage rates. Bond yields have been rising since the beginning of the year, which spiked up further last week. While many lenders have not increased their rates, some of the ‘secret’ rate promotions offered by the banks have now disappeared. The lender with the lowest 5 year fixed rate of 4.69% increased their rate by 0.10% yesterday, followed by another 0.15% this morning, bringing it to 4.94%*.  The lowest 3 year fixed rate in the same category has now increased from 4.99% to 5.24%.  

Fortunately, the bond yields have been relatively flat for the past week, however, there is no guarantee that the upward trend will not resume. If they continue to rise, then I would expect to see more lenders respond with increases to their fixed mortgage rates. Eventually, we’ll see the yields start to trend back down, which would then push fixed mortgage rates down with them. If the forecasts remain on track, then this is likely.  

 

Locking in a Rate to Maximize Savings  

This does not mean that you should be waiting to lock in a rate. While the yields may have stabilized for now, they remain in the danger zone where we could see more lenders increase their fixed rates at any time. If you have a purchase closing, or a mortgage coming up for renewal in the next 120 days, I recommend reaching out to us ASAP to find out the lowest rate you’re eligible for, and to get something locked in.  

We’re still getting super low rates from one of the major banks, but it’s hard to say how much longer this will continue. It’s best to get a rate locked in soon to ensure you’re getting in at the lowest rate possible. We can still get your rate lowered for you should the rates drop further… even if you have already signed.  

There is one major bank that has been extremely aggressive with the low rates they have been giving our clients lately… almost to the point where it seems like they are messing up! It’s hard to say how much longer this will go on for, but I’m certainly hoping it continues.  

 

Conclusion  

It’s promising that the Bank of Canada is no longer talking about potentially hiking their rate further. Economists remain optimistic that we’ll see the rate cuts begin as soon as April of this year, which is also promising. They believe that the Bank of Canada may be overly optimistic on the strength of the economy, which would imply that rate cuts wouldn’t be coming anytime soon. While we’re not there yet, it’s reassuring to see that many economists are still expecting cuts to come this spring. It’s reassuring, but as we’ve seen many times before, they can be wrong.  As always, time will tell, and anything can happen.