Canada’s unemployment rate has fallen to its lowest level in over 40 years. In December 78,600 jobs were created. As a result every Canadian Bank is predicting the Bank of Canada will increase the overnight lending rate by 0.25% on January 17th, 2018. This means we will likely be starting the year off with an increase in our Variable Rate Mortgage payments.
In addition to an incredibly healthy unemployment rate the Bank of Canada also studies something called, “the Overall Business Outlook Indicator”, this number rebounded in the fourth quarter and the reading is one of the highest in the past 17 years. It is important to note that this indicator of business intentions to invest more has been positive for five straight quarters after eight quarters of negative readings.
- Inflation numbers are still low and in the business outlook survey the Bank of Canada conducted, more executives saw inflation holding at or below 2% over the next two years.
- Household Debt continues to increase. As a result any increase in borrowing rates will have a more pronounced affect. Coupled with the new mortgage rules just introduced refinancing a home is now harder and more expensive than any time in the past 25 years. Although this has not been felt in the economy yet it is sure to make an impact in the 2019 numbers.
- The Canadian Dollar is now about 11% higher than it was in May relative to the US. Coupled with the possibility that NAFTA could get shown the door like a contestant in a reality TV show, there may be a reason to stay cautious.
So… The question remains, fixed vs. variable? Although the incredible job numbers did catch everyone off guard and a rate hike is more likely now than ever before we are still partial to the Variable Rate Mortgage. That being said there are still great fixed rates being offered.
Today you can lock in a rate between 3.04% and 3.69% on a 5 year fixed rate mortgage. That rate varies depending on whether you are looking to purchase or refinance and the amount of equity you have, so please feel free to give us a shout for more details at 416.766.9000.