Economists say Bank of Canada Governor Stephen Poloz's pending rate announcement probably won't have much effect on Canadians' mortgages.
At 10 a.m. ET today, Poloz will announce the central bank's decision on Canada's overnight rate, setting the interest rate at which big banks borrow and lend. Many predict it will be cut by 0.25%, from its current level of 0.5%.
Experts also say changes to the overnight rate have traditionally had major implications for Canadian mortgages. But times have changed and the central bank's power to influence the housing market has dwindled.
It used to be that any change to the central bank's overnight rate would be followed lockstep by changes to the prime rate — the interest rate commercial banks charge their most credit-worthy customers. Canadians with variable-rate mortgages would then see that change reflected in their monthly payments.
But when the Bank of Canada slashed the overnight rate by 0.25% a year ago, commercial banks only cut their prime rate by 0.15%.
This time around, bankers say, if Poloz announces a rate cut, the banks may not follow suit at all.
Mortgage rates have, indeed, been creeping up — a fact that may have many homeowners scratching their heads.
CIBC increased its three-year fixed rate by 10 basis points to 2.59%. RBC upped its special offer on a five-year fixed mortgage by one-10th of a point to 3.04%. TD Bank increased its one-year and four-year closed special rates by one-10th of a point each. Scotiabank increased its variable rate by 10 basis points.
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