Bank of Canada Overnight Rate - Little Impact on Mortgages

Mortgage rates have been increasing the last few months, which may be unexpected given the current economy.  Normally during times like these, with low oil and a dropping loonie, mortgage costs would subsequently be decreasing. This has not been the case.This is because mortgages are tied to government bond yields which are at an all time low as risk-averse investor shy away from the market.

With the announcement that the Bank of Canada is holding the overnight rate at 0.5% mortgage rates are not expected to increase much further.  "I think that mortgage rates will remain relatively stable," CIBC deputy chief economist Benamin Tal told CBC News. "I just don't see anything that will send them up."

Despite the steady forecast for the next year or two, experts advise new homeowners or those renewing their current mortgages to choose a fixed, or locked in, rate with regular monthly payments that aren't tied to the prime. "The pendulum will eventually swing back," Tal says.

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