The Governor of the Bank of Canada, Mark Carney, left the Prime rate at 1% as he has since September of 2010. This isn't really the newsmaker but what is making news is what he is hinting at doing and when
Some of the following quotes were within the statement made by him and the BofC on Monday:
•“Overall, economic momentum in Canada is slightly firmer than the Bank had expected in January.”
•“The economy is now expected to return to full capacity in the first half of 2013.”
•“The profile for inflation is expected to be somewhat firmer than anticipated.”
•“Europe is expected to emerge slowly from recession in the second half of 2012”
•“In light of the reduced slack in the economy and firmer underlying inflation, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate.”
The last point, which hints at future rate hikes to come, could trigger fixed rates to go up again as once the bond market took note of this comment the yields went up by 10 basis points or .10% When bond yields go up it usually mean fixed rates for mortgages will go up. In the Bank of Canada's statement in their previous meeting they indicated the Prime rate could start going up somewhere in early 2013. Some leading economists now think it could be as early as the fourth quarter of this year.
There are, however, still headwinds for the economy, domestic and international, to face before we're out of the woods. Things like the sluggish U.S. economy and Europe's Sovereign debt crisis.
No matter when the Bank of Canada starts raising the Prime rate, which affects Variable rate mortgages, fixed mortgage rates will definitely be higher by that time as they always go up first in anticipation of this rate hike.
If you're in the market to buy a home or renewing your mortgage in the near future it may be a good idea to renew soon or get a rate hold for a new home purchase of up to 120 days here at RBC.
Tony Marchigiano | Mortgage Specialist | Royal Bank of Canada | T. 604-505-7109 | F. 778-737-0054