Bank of Canada Has Paused Rate Hikes… for now
The Bank of Canada announced today (March 8th 2023) that there will be a temporary pause on a slew of interest rate increases that have been taking place for just over a year now…
So I’m telling my clients 2 things:
- Wish the BOC a happy anniversary
- Go get pre-approved.
There’s no indication that raising the rates again is in the cards for the next announcement, but there’s a lot going on outside our borders that can have an affect on our economy. Inflation is still running high at 5.9% as of last month, which is down from 8.1% in the summer, time but still not close enough to the 2% target the BOC tries to maintain in normal circumstances.
The hope is that we see inflation at the 3% mark at the half-way point of the year.
With the US dollar strengthening in comparison, and the possibility of another couple of rate hike coming from the Fed in the US, there could be a hard decision to make for the BOC. Since a lot of our goods in Canada are imported from the United States, we could be “importing inflation” with a weaker Canadian dollar. Inflation in Canada might not cool down as quickly without another couple of nudges up on the interest rates to follow suit, or find a way to hand a CAD that is not performing as well as some of it’s global counterparts.
This is why I’m getting my buyer clients to get their pre-approval locked in right now.
What if rates drop?
Historically it usually takes 8-12 months for rates to be lowered after a series of hikes. This is strictly dependent on what is happening in the Economy, so anything can happen, but I have to lean towards the trends in a world of no guarantees. Even if rates were to drop sooner, my clients can always get approved again to lock in at a potentially lower rate.
If rates are bumped up again, the pre-approval has already locked my client into the rate the lender offered and is good for the length of the term of the pre-approval. Usually pre-approvals can be valid for 90-120 days, so as long as you can get the purchase to close prior to the pre-approval expiring you are good to go!
Some might feel as though buyers have a bit of breathing room right now, but the other factor being being overlooked is the low inventory of listings that this area has been experiencing over the last 3 years. With a break from interest rate volatility more buyers might start to come back out of the woodwork after sitting on the sidelines for the last several months. When demand rises on a dwindling supply, prices will most likely start to rise again, which will put a further strain on affordability across the board.
If you are planning on making a move in 2023 it should definitely start with a pre-approval.
Send me a quick update about what your plans are, and we can chat about getting you to your goal!
