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This is the fifth interest rate increase since July of 2017, and the third in 2018.
The Bank of Canada (BOC) cited robust U.S. and Canadian economies and the new US-Mexico-Canada Agreement (USMCA) as some of its reasons for the increase.
Other justifications included business investment and export projections, a stable inflation rate, and steady household spending.
There was only one mention of the Canadian housing market in the announcement.
“Households are adjusting their spending as expected in response to higher interest rates and housing market policies,” the BOC stated.
“In this context, household credit growth continues to moderate and housing activity across Canada is stabilizing. As a result, household vulnerabilities are edging lower in a number of respects, although they remain elevated.”
The October 24 rate increase was expected by many, especially once the USMCA deal was approved.
The BOC indicated there will be more increases on the horizon, though perhaps not as many as originally thought.
“In determining the appropriate pace of rate increases, Governing Council will continue to take into account how the economy is adjusting to higher interest rates, given the elevated level of household debt,” the BOC said.
There is one more interest rate announcement scheduled for 2018, on December 5.
The effects of the hike on real estate interest rates remain to be seen.
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