‘The perfect trifecta for buyers’: Bank of Canada holds key rate at 2.75%

The Bank of Canada has kept its key interest rate at 2.75 per cent, a move largely based on economic uncertainty caused by the U.S. trade war.

The Bank of Canada has announced it’s leaving its benchmark interest rate unchanged at 2.75 per cent.

The decision was largely based on economic uncertainty created by U.S. President Donald Trump’s global trade war.

“Uncertainty remains high. The Canadian economy is softer, but not sharply weaker, and we’ve seen some firmness in recent inflation data,” said Tiff Macklem, BoC governor.

Macklem says there was some unexpected firmness in recent inflation data, but the decision was made to hold the rate steady

“Against this backdrop, we decided to hold the policy rate unchanged as we continue to gain more information on U.S. trade policy and its impacts,” said Macklem.

The central bank says it will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures from higher costs.

“We are certainly starting to see interest rates bite for consumers, where we see increases in the number of consumers unable to make their payments, skipping payments on credit cards and car loans, as well as getting into difficulty in terms of bankruptcy,” said David MacDonald, a Senior Economist for the Canadian Centre of Policy Alternatives.Economist Colin Mang says he believes the BoC’s decision to take a wait-and-see approach was the right move.“There’s a lot of concern around many of the goods that we trade, particularly around grocery prices with retaliatory tariffs. Right now, the bank is just not in a very good situation to forecast where the Canadian economy is going to go over the next six months,” said Mang.

Impact to Lower Mainland real estate market

The economic uncertainty is also cooling the Lower Mainland’s once red-hot housing market. Sales are the slowest they’ve been in a decade.

“Once or twice a decade, we get an opportunity like this, as a homebuyer, to go out there, look at a whole host of different properties, take your time in making an astute, thoughtful decision, and not be rushed, and also negotiate your terms,” said Adil Dinani, a spokesperson for Royal LePage.

Although rates did not dip Wednesday, many mortgage brokers say now is the time to make a move.

“We’re averaging a low four per cent for fixed and variable interest rates right now. So it is historically average interest rates at this time,” said Vik Sahi, a broker with Mortgages 4 You.

“You’re seeing rates dip, you’re seeing prices soften, and you’re seeing your supply and your inventory increase. Meaning all three of those together is the perfect trifecta for buyers.”

Sahi says uncertainty brings opportunity.

“There’s still a lot of opportunity to make moves and refinance if you had a higher rate from 2023 or 2024, there’s a lot of strategies that we could place that are going to save people a lot of money, even in this market of uncertainty,” said Sahi.Economists widely expect there to be at least one more rate cut by the end of the year.