Mortgage Rates Drop Again

January 22nd, 2008 Categories: Real Estate News, Vancouver Real Estate

Are you real estate buyer in Vancouver? Then you’ll be happy about rates going down.

Bank of Canada cuts policy rate by 25 basis points
The Bank of Canada cut the overnight rate by 25 basis points to 4% saying that “further stimulus is likely to be required in the near term to keep aggregate supply and demand in balance and return inflation to the target over the medium term.” The Bank said that “the 2008 outlook for the US economy is now significantly weaker than at the time of the October MPR” and that this “will lead to additional downward pressure on export growth.” However, the Bank remained optimistic on the outlook for Canada’s domestic economy saying that “despite tighter credit conditions, domestic demand in Canada is projected to remain strong.”The Bank’s announcement came after the Fed cut the Fed funds and discount rates by 75 basis points this morning citing “a weakening of the economic outlook and increasing downside risks to growth.” Although details on the changes to the Bank’s forecasts were scant in today’s press release, the Bank said they expect “weaker growth in 2008 than was expected in October, with the economy moving into modest excess supply in the second quarter of this year.” The release also said that the Bank has revised the inflation forecast lower with both the core and all-items inflation rates expected to fall below 1.5% by the middle of this year. The press release cites the “increased competitive pressures in the retail sector stemming from the level of the Canadian dollar” as contributing to the lower-than-expected inflation rates recently. The Bank still expects both the all-items and core rates to return to the 2% target by the end of 2009 and said that the “risks to this inflation projection are roughly balanced.”Today’s release points to additional rate cuts ahead by the Bank especially if the U.S. economy remains under downward pressure. Our baseline forecast is that the Bank will lower the overnight rate by another 50 basis points during the next couple of meetings with the risk of more aggressive rates cuts if the US situation continues to deteriorate. Dawn Desjardins, Senior Economist, http://dawn.desjardins.comRBC’s Best Rates:Variable 5.25%, 6 month convertible at 6.04%, 5 years 6.09% 30day close special.