The Bank of Canada holds its prime rate at 1%.
You can’t borrow money at those rates. You have to be a chartered bank.
But, all other rates, from bank to bank loans, to mortgages, consumer and credit card loans are all based on the Bank of Canada prime.
It’s more of a leading indicator than anything else.
As for real estate, we are within the six week peak of the Spring market. The peak will end up being:
So, it’s important not to interfere with reasonable market conditions right at the time when the market is most active. This is the time when the “reset” button is pushed on prices for the entire year.
The “qualifying rate” for consumer mortgages is the 5 year rate with a 25 year amortization. Right now, that works out to about 5.24%. If a consumer qualifies for a mortgage on that basis, that will be the highest amount that can be offered on the basis of a high ratio CMHC insured mortgage. But, that consumer might select any number of similar deals, including 5 years at 2.89%, or 1 year at 2.65% or 10 years at 3.69%.
Some comments from the Bank:
- our historic low rates "will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required."
- growth in Canada will regain some momentum through 2013, with the economy "reaching full capacity in mid 2015 – later than anticipated."
The Bank's next rate decision is scheduled for 29 May 2013, or two days before the end of the six week period.
Brian Madigan LL.B., Broker