Most economists who specialize in banking have predicted that the Bank of Canada will not change rates, except for Scotiabank. Moreover, inflation, which was reported at 2.4% in January, is on the higher side of things, and we should note that housing prices are on an upswing, according to the most recent numbers.
In addition, unemployment levels are low, and all of the trends mentioned above and numbers should place some pressure on the Bank of Canada to increase rates in 2020. Here, we will delve deeper into residential mortgages in Ontario and Canadian interest rate trends for 2020.
How COVID-19 Will Impact Residential Mortgages in Ontario
According to a recent C.D. Howe Institute survey, 70% of economists expected mortgage interest rates to go down on March 2, 2020, while 60% of the economists polled by Reuters claimed that the central bank would leave its overnight rate unchanged until the end of the year.
However, the advent of the coronavirus may have serious implications on both the Canadian economy and many global markets. For instance, many Canadian economists have called for cuts in interest rates later in the year due to both regional and global fears involving the pandemic.
Scotiabank’s Analysis of Mortgage Interest Rates in 2020
Scotiabank continues to stand by its stance that rates should be lowered and has cited both poor consumer confidence and stagnating economic growth as reasons for their position.
In addition, Scotiabank economists also believe that the coronavirus may further compound the issue, and believe that the Bank of Canada (BOC) will be strong-armed into lowering rates in order to stop a slowdown from manifesting.
Thus, lower rates, regardless of whether or not the imminent threat of COVID-19 prompts them, should help boost housing prices in the country. However, some experts fear that doing so will have a negative impact in other key areas that will invariably hinder home prices in Canada.
How Conflicting Signals Will Impact the BOC’s Decision
Given the conflicting signals that the Bank of Canada has received as of late, some economists, such as those who represent Mortgage Sandbox, claim that the BOC will leave interest rates as-is to not rock the proverbial boat. It should also be noted that the Bank of Canada’s main goal is to have inflation rates stabilized at roughly 2%.
Essentially, Canadian economists can be categorized into three distinct groups at this point: “followers”, “bulls”, and “bears”. The “followers” predict that rates will remain unchanged, while the “bulls” expect the economy to pick up steam sooner rather than later. As such, they predict that the Bank of Canada will be able to elevate interest rates back up to conventional levels.
As for the “bears”, they expect rates to be lowered because they believe that lower rates are a must in order to give a weakened economy a much-needed boost. If you would like to learn more about residential mortgages in Ontario and predicted interest rate changes, please visit Northwood Mortgage™ on our website.