BOC Holds – Who Cares?

The Bank of Canada (BoC) announced today that they are HOLDING their Key Rate at 5% – but why should you care?

Well, there are two reasons you should care.

The first one would be WHY they decided to hold. Essentially, the BoC manipulates their Key Rate (the rate at which ALL banks borrow their money and then turn around and loan it to you (at a markup aka Prime Rate) based off of how much or little they think you should be spending on stuff. If people are spending TOO MUCH and Inflation starts to get out of control, or perhaps debt levels get out of control – they INCREASE their rates to (essentially) squeeze your pocket book and make you calm your spending.

Tough love – yes. But sometimes required.

So the REASON therefore that they decided to HOLD rates is because they are seeing that people and the economy are getting their financial acts together – WHICH IS GREAT.

Inflation is down a little to 3.8% from 4%, and the GDP was flat last quarter at .03% growth (if it would have been in the negative then combined with last Q’s negative growth then we would have officially been in a recession).

So imagine a plane about to crash and then barely pulls up in time and skims the trees and everyone is safe.

Good play BoC. Good play.

The Second reason you should care about this is because since our financial plane just skimmed the trees and everyone will be ok – that sigh of relief will have great ripple effects moving forward. Happy and relieved people have less stress and anxiety, tend to go out and have a little more fun, spend a little money – and overall just make life more enjoyable. So that’s good!

These are two reasons you should care about the announcement this morning.

Now if you are BUYING and/or SELLING Real Estate then this has even more importance to you. The MAIN thing here is that we will have decent consumer confidence moving forward, which in turns means Sales Activity should continue to creep along at (hopefully) decent levels.

Why that matters is because the last rate hikes … well honestly… they hurt.

Last year the average home in Ottawa was 745K and as of last week the average is 588K – nearly a 200K difference. That 745K was also down from nearly 800K the year before that. If you’ve been looking to sell then it hasn’t been a good run the past few months, so this should at least stabilize things and give us a little bit of activity before we close out the year.

If you’re looking to Buy – this might honestly be the bottom of the market.

The BoC is claiming they want to LOWER their key rate by the end of Q2 (June) next year down to 4%, which means variable loan payments will go down and prices will start going back up.

If you want any more info on this situation or have anything you want to run by me please dont be shy. You can call me or text me directly at (613)868-4383, or email me at mevans@remax.net.

Best