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What mortgage owners need to know about the BoC rate hold

Mortgage owners in Canada are navigating a landscape of mixed emotions as the Bank of Canada (BoC) recently opted to maintain its key policy rate at five percent for the fifth consecutive meeting. Bank of Canada Governor Tiff Macklem emphasized in a speech that it's "still too early to consider lowering the policy interest rate." This decision, though expected by many, has left Canadians pondering the implications for their mortgages and financial well-being.

Victor Tran, a mortgage and real estate expert at Ratesdotca, expressed in an interview that the announcement was unsurprising to Canadians. However, Alana Riley, the head of insurance mortgages and banking solutions at IG Wealth Management, noted that the decision has stirred mixed emotions among Canadians, particularly those anticipating a drop in rates during the upcoming Spring season. Unfortunately, this decision is poised to exert continued pressure on the cash flow of Canadian households, especially those with variable-rate mortgages, home equity lines of credit (HELOCs), and unsecured lines of credit.

James Laird, the co-CEO of and president of CanWise mortgage lender, suggested that Canadians should brace for sustained high rates until the central bank is confident in controlling inflation. For those with variable rates or HELOCs, the absence of any indication regarding the timing of the first rate cut may be disappointing. However, Laird reassures those who haven't reached their trigger rate that they can find solace in remaining below that threshold.

Experts highlight a trend where consumers are increasingly favoring fixed-rate mortgage products, prioritizing certainty and stability in uncertain times. This shift away from variable rate products is observed by Tran, who notes that shorter-term fixed products are likely to stay popular, especially with potential rate cuts anticipated in the second half of the year.

The decision to maintain interest rates coincided with concerning data from Equifax Canada, revealing an uptick in mortgage delinquencies in Ontario and British Columbia during the fourth quarter of 2023. Mortgage delinquency rates surpassed pre-pandemic levels, rising by 135.2 percent in Ontario and 62.2 percent in B.C. Daniel Vyner, the principal broker at DV Capital, cautioned against underestimating the impact of a prolonged hold, particularly for those who entered the market at lower interest rates.

While some homeowners may weather higher interest rates, Vyner emphasized that others may lack the financial resilience to do so. The decision to keep rates on hold may be perceived as a positive move by many; however, it underscores the importance of carefully assessing the potential repercussions for those who entered the housing market during periods of lower interest rates.

Surprisingly, the BoC did not comment on concerns about the robustness of Canada's real estate market despite Laird's expectations. Tran noted a surge in real estate activity in Greater Toronto and Southern Ontario, with buyers re-entering the market and participating in bidding wars. As interest in a potential rate cut later in the year grows, prospective buyers are eager to act before the market becomes even more competitive. The current scenario paints a picture of a bustling real estate market, reminiscent of a seller's market, as buyers return with renewed enthusiasm.



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