As expected, the Bank of Canada opted to leave its market-setting overnight lending rate unchanged at 1.0 percent. The Bank of Canada rate effectively sets the market for a range of home mortgage products – from first and second mortgages, to home equity loans and home equity lines of credit – by determining the rate at which the major banks lend money to each other on a short-term basis to cover their daily transactions.
Citing a “new phase” in the global economic recovery, in which “the combination of difficult labour market dynamics and ongoing deleveraging in many advanced economies is expected to moderate the pace of growth relative to prior expectations,” Canada’s central bankers elected to leave its lending rate unchanged as a spur to domestic economic growth.
While the Bank of Canada will release a fuller monetary policy report tomorrow (October 20), it specifically cited “a weaker U.S. outlook, constraints beginning to moderate growth in emerging-market economies, and domestic considerations that are expected to slow consumption and housing activity in Canada” as the reasons to put off “any further reduction in monetary policy stimulus” for the time being.
For homeowners (or prospective first time homebuyers) a pause in the Bank of Canada’s course of interest rate hikes – the only G7 country to have raised rates in 2010 – should translate into continuing mortgage rates well below historic norms for a full range of home mortgage products well into 2011.
