Hello everyone, it’s Rasha Ingratta licensed Mortgage agent with Mortgage Intelligence here in Windsor Ontario and I just wanted to quickly update everyone on the overnight rate announcement that was just made December 6. Governor Tiff Macklem made a crucial announcement: the benchmark interest rate will remain at 5%. This marks the third-rate announcement in a row where the bank held the overnight rate, this is due to a slowing economy. The slowdown in the economy is reducing inflationary pressures in a broadening range of goods and service prices. Currently, the CPI is at 3.1% and the target range is around 2-3%.
What does this mean to the household consumer that has debt that depends on the prime rate, whether it’s a variable rate mortgage that depends on prime, a home equity line of credit or a credit line? Prime today is set at 7.20%. When do we think Bank of Canada will start to reduce that bank of Canada rate is the question. If the CPI stays its course and inflationary prices dip more in the new year, the Question again is when? There will be 8 announcements in 2024, the first four will be on January 24, March 6 , April 10, June 5. I think on March 6 or April 10 we will see the move happening, and when it starts it won’t be a 1% move like they did when they raised rates. It will happen gradually and I think it will be in 25% increments. They want to do this carefully and cautiously monitor the inflationary environment. We don’t want inflation rates to spike up again in 2024.
Again, we all wish for a crystal ball, but this is my opinion and we will see what the New Year holds for us. Be safe and enjoy your holiday season with your friends and families.