The bank of Canada has just raised their rate to a 22 year high at 5.0%. This move has us all pondering : What are interest rates going to do? Whether you’re a Mortgage Broker, a Realtor, a homeowner, a consumer, or an investor – everyone wants to know what interest rates are going to do. This proves to be a challenging question. Below are some of the latest opinions of reputable economists.
What the economists think
The economists are divided on predictions for not only the next BOC meeting, but also the strategy that will unfold in the coming months.
RBC Economics – Claire Fan:
“We continue to expect the full impact of rate hikes to date to come through gradually, slow spending over the second half of this year and for that to push the central bank back on the sidelines with no additional interest rate hikes this year.”
Desjardins’ Senior Director of Economics Randall Bartlett:
“Given that the Bank even considered pausing at this month’s meeting, the better-than-expected inflation outcome reinforces our forecast for the overnight rate to be maintained at 5% for the remainder of the year,” he noted.
CIBC Economist Benjamin Tal:
“This is opening the door for another move in September,” Tal said. “Our official call is now that the Bank of Canada is going to move again, unfortunately, in September by 25 basis points, and that maybe will be the end of it.”
“We have to realize that we are already in a process of, in my opinion, overshooting – maybe by design by the Bank of Canada,” he said. “But it also means that if you overshoot, you accelerate the process of cutting.”
“We have to realize that this is an asymmetrical game, namely a situation in which the Bank of Canada is getting mixed signals from the economy,” he explained. “Some signals suggest that the economy is strong, some suggest that the economy is reacting to higher interest rates and slowing down, especially the housing market.”
So, now what?
While interest rates play a major part in our clients decisions, the basic need of housing is universal and is not going away. Fixed interest rates may be around 5-6% range, making home ownership more costly than Rent is astronomical and not doing anything to build clients networth.
At the end of the day, you have to live somewhere! Real Estate is always a good long-term investment.
If you have questions, we are here to help. 250-753-2242
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