U.S. Federal Reserve Raises Rates Again + MORE Jun 17th

Amid signals the Bank of Canada may hike its key interest rate, those on the edge of being able to afford their payments may want to lock in rates now.

Canada’s economy is red-hot these days. And that’s the principal reason why Canadians could see mortgage rates rising before the end of the year.

In the first quarter of this year, Canada recorded a 3.7-per-cent annualized pace of economic growth, the strongest among G7 countries. Canada added 77,000 full-time jobs in May, and over the past year, the country has seen total jobs increase by 1.8 per cent, faster than population growth.

When an economy strengthens, there is less slack and inflation typically picks up. When inflation picks up, central banks raise interest rates.

So far, inflation has been tepid in Canada. But every sign points to that changing soon. Bank of Canada Governor Stephen Poloz said this week that the low interest rates put into place in 2015 to fight the oil price collapse have “done their work.” That is as clear a sign as you’re going to get from a central banker that they are leaning towards raising rates.

Read more:

A Return To ‘Normal’ Mortgage Rates Would Crush Canadians
Canada’s Banks Resist Plan For Them To Take On More Mortgage Risk

As recently as a month ago, most analysts saw the Bank of Canada hiking rates no earlier than early 2018…

Bank of Canada Senior Deputy governor, Carolyn Wilkins, made headlines this week when she hinted of pending rate hikes. The reaction by investors was swift.  Bond yields were up 20bps. Fixed mortgage rates are priced from Gov of Cda bond yields.  Variable mortgage rates are priced from Bank of Canada rate.  And the next Bank […]

OTTAWA — Homeowners with variable rate mortgages losing sleep over the increased chatter about a potential interest rate hike by the Bank of Canada should consider locking their rates in now, mortgage experts say.
James Laird, co-founder of interest rate-comparison website RateHub, says in order to stick with the variable option you need to be able to handle fluctuating rates.
“Rates might go up much faster than anyone is expecting and so if you’re right on the border of being able to afford your mortgage payment and you’re able to lock in an affordable payment for five years, you should definitely do that,” Laird said.
Recent comments by the Bank of Canada have prompted speculation that it may move to raise its key interest rate sooner than many economists had expected.
The central bank has kept the rate on hold at 0.5 per cent after cutting it twice in 2015 in an effort to boost the economy.
An increase in the Bank of Canada’s overnight rate target will prompt the country’s big banks to raise their prime rates, which will push the rate charged on variable rate mortgages higher…

For the third time in six months, the U.S. Federal Reserve has raised its benchmark interest rate – this time, by a quarter-point. The announcement, widely predicted by economists, is the latest vote of confidence in the U.S. economy. It’s also an indication that Federal Reserve Chairperson, Janet Yellen, is seeking to normalize rates from the rock bottom lows they’ve sat around since the financial crisis in 2008.
Starting now, short-term rates in the U.S. will range from 1 to 1.25 per cent.  The Fed also announced it plans to gradually start paring its $4.5 trillion investment in treasury and mortgage bond holdings by $6 billion a month, meaning long-term rates will start to rise too.
The increase does mean higher borrowings costs for consumers and businesses, but better returns for Americans with money in the bank.
The rate hike comes despite the fact that 2017 (in the U.S.) is off to a sluggish start. The Fed predicts this is temporary and expects the economy to pick up steam for the remainder of the year…