Another Bank of Canada Rate Cut – July 15, 2015

Hey everyone! I hope you’re all having a fantastic Wednesday. I usually write these posts closer to the weekend, but there’s some breaking news in Canada right now and it just couldn’t wait: if you haven’t already heard, the Bank of Canada has cut its overnight rate by another quarter percentage point.

Now, a quick recap before we really dive into what that means – back in January the Bank of Canada dropped its overnight rate to 0.75%, after it had been sitting at 1.00% since September 2010. As I outlined in my blog post on the subject, the overnight lending rate is Canada’s key policy rate, because it determines how Canadian banks should structure their own interest policies. And back in January, when the Bank of Canada cut their rate by 25 basis points, the Big 6 Banks cut their rates by only 15. That was a big slap in the face to Canadian consumers, because the entire point of the bank of Canada’s rate cut was to stimulate the Canadian economy – and the banks decided to pocket most of the savings for themselves instead.

That brings us to today, where “faltering global growth, disinflation and low prices for oil and other commodities” has caused the Bank of Canada to cut the overnight rate by another 25 basis points – again, with the intent to spur the Canadian economy, particularly by spurring the housing market (as Robert McLister puts it at, a “reduction [of 50 basis points] in the 5-year mortgage rate can lead to as much as a 15% increase in home sales nationally”).

Ignoring the larger issue of the current Canadian economy, the biggest problem today is that the Big 6 Banks are pulling the same cheap trick this time around. According to that CBC article, TD has lowered its interest rate by just 10 basis points, an even lower reduction than it made in January. The other banks haven’t responded at all yet (in itself an insult – until this year, there’s always been a simple 1:1 correlation between the Bank of Canada’s overnight rate and the banks’ interest rates), but they’ll presumably follow TD’s lead. What this means is that in 2015, the Bank of Canada has gone to fairly extreme lengths to strengthen the Canadian economy – they’ve cut their overnight rate by a full 50 basis points. In stark contrast, the Big 6 banks – who are the sole beneficiaries of that overnight rate cut – have only cut their interest rates by 25 basis points. That means they’ve only given half of their rate cut to Canadian consumers – they’re essentially profiting off of our economic downturn.

Thankfully, it’s not all as bad as it seems. For one thing, your interest rates are not necessarily dictated by the Big 6 Banks. As a mortgage broker with access to over 40 lenders, I can find you a rate that’s a better fit for both you and the Canadian economy. As I mentioned in my last post, the housing market in Canada is still doing exceptionally well – and as long as you do your due diligence when getting a mortgage (or better yet, have me do it for you!), your interest rate can do exceptionally well too.

Lastly, as a bit of a counterpoint to the overall gloominess of this post, the British Columbia economy is doing amazing right now. From that article in the Vancouver Sun: “Finance Minister Mike de Jong says British Columbia is firmly in the black with a budget surplus of $1.6 billion, significantly higher compared to a forecast of $184 million.” That makes our province’s budget numbers “the best in the country,” and it’s a good reason not to get too worked up about a minor economic downturn (Bank of Canada Governor Stephen Poloz doesn’t even classify it as a mild recession, let alone a significant one).

On that note, I once again urge you all to be conscientious, considerate Canadian consumers. If you’re looking at getting a mortgage, that means consulting a mortgage broker (especially since mortgage brokers don’t charge you anything). If you’re in Northern BC and looking at getting a mortgage, my number is (250) 782-9665, and my phone is always on.

Have a great rest of the week, and remember to stay positive!

Lori Lalonde, Your Northern BC Mortgage Broker

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As the Spring Market Comes to a Close, Canadian Housing is Still White Hot

Hey everyone, and happy Friday! It’s been a few weeks since my last post, so I thought I’d catch you all up on what’s been going on in the world of mortgages. And at the risk of jumping the gun – it’s not a lot.

That’s pretty standard for this time of year, as the Spring Housing Market is starting to come to a close. And given just how awesome this past season has been for the housing market, it’s no wonder that things seem slower right now. A case in point comes from an article published just the other day on The Globe and Mail, whose headline pretty much says it all: “Housing starts hit 11-month high in June.” That means that more housing units were started last month than in the previous ten, which is a pretty good indicator that Canadian real estate is doing great.

Take this quote from the article provided by Nick Exarhos, CIBC’s World Markets economist: “Despite worries tied to other parts of the Canadian economy, housing continues to post solid readings.” Even better for readers of is that this housing stability is led in Canada by British Columbia, where “the seasonally adjusted annual rate of urban starts increased… by 45.1 per cent.” Some of this can be attributed to Vancouver’s ever-growing housing market, but not all of it: remember that Northern BC is doing absolutely phenomenal right now.

One last thing I’ll point out from the Globe and Mail piece is that according to Statistics Canada, “new home prices in Canada also rose higher than expected.” Higher prices go hand in hand with a booming marketplace, of course, but I thought it would be especially pertinent to my readers – or at least those readers who are in the market for a new house or mortgage. If you fall into that category, I would like to again urge you to think about acting fast. The Spring Market may be on its way out, but this is still a damn fine time to be getting a mortgage – especially if you live in Northern BC.

Finally, I’d like to remind everyone (but especially those people whose interest was piqued with that last paragraph) that my phone is always on, I’m always willing to help, and I don’t charge for my mortgage services.

Have a great weekend everybody!

Lori Lalonde, Your Northern BC Mortgage Broker

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