The Bank of Canada this week has publicly stated that their economic recovery outlook remains on a 2 year timeline and therefore no additional rate support is needed at this time, even amid a new wave COVID-19 cases and returned lock down efforts across the country.
This latest statement effectively quashes recent speculation that the BOC would cut the already historically low borrowing rates even further. Leaders at the Bank of Canada obviously feel there is reason to be more optimistic about the direction of the economy over the medium and long term.
The Bank is holding its interest rate at 0.25%. As a result, interest rates that apply to mortgage rates that commercial banks give to their customers will also likely remain just over 2 percentage points above this current rate. The bank also reiterated Wednesday it will keep borrowing costs at least this low until 2023.
While a second wave of COVID-19 cases has forced governmental bodies at the Provincial level to impose more strict measures on businesses, the Bank of Canada is feels it will produce an economic contraction in the first quarter of this year.
What does this mean for the housing market. The simply answer is money is basically free at the moment, so it's a good time to have a mortgage and the recent statistics tell the same story.
Canadians have been taking on more and more mortgage debt despite the ongoing COVID-19 pandemic, as borrowers try to keep up with a housing market that took off in the latter half of 2020 and has yet to slow down.
Statistics Canada said Tuesday that household mortgage debt increased 7.4 per cent in November compared to a year earlier, pushing the total up to nearly $1.66 trillion.
The year-over-year pace of mortgage growth for November surpassed that of October (6.9 per cent), September (6.5 per cent) and August (6.1 per cent). It was also greater than that of any other month in 2020, as well as the 4.3-per-cent growth seen in the pre-pandemic month of Nov. 2019.
2020 ended up being a historic year for Canada’s housing market and it looks like 2021 is likely going to follow the same pattern.
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