When will the march toward higher interest rates begin? It’s already underway in earnest depending what you’re looking at.
Royal Bank of Canada and TD, two of the country’s biggest home-loan lenders, have both nudged their mortgage rates higher in recent weeks.
And with the economy performing better than what experts expected in recent months, the record-low rates established in the wake of the credit crisis and global recession appear to be headed for an incline for the foreseeable future.
Doug Porter, chief economist at BMO said Wednesday he expects the Bank of Canada to raise its key rate by half a percentage point to 1.5 per cent next year. The BoC sets the benchmark interest rate commercial lenders base their own on.
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The Bank of Canada’s overnight interest rate also influences the Canadian dollar and mortgage rates. Any move upward would make the currency more expensive as well as housing carrying costs.
Porter’s prediction breaks with that of Scotiabank economists Derek Holt and Dov Zigler, who suggests the key rate won’t be lifted by new governor Stephen Poloz until 2015.
The assessment was made following a speech also on Wednesday from Poloz, who took over from Mark Carney on June 3.
“Our broad takeaway is that this speech further reinforces our prolonged (rate) pause forecast into 2015,” said the Scotiabank economists.
A rise in the rate of even half a percentage point would put pressure both on many mortgage borrowers, who would see monthly payments rise, as well as exporters, whose goods would become more expensive on the international market.
Exports are a component of the economy Ottawa is banking on spurring growth as domestic spending slows down.
Poloz said Wednesday he would provide some insight into the central bank’s timetable for raising rates at the next scheduled announcement on July 17.
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