Same BoC rate - New BoC attitude

The Bank of Canada (BoC) announced yesterday they will be holding their overnight rate steady. The last increase we saw was in July of 2023. The streak now stands at four consecutive meetings with no change. But, there was a significant difference in the language of this announcement from the previous three. The tightening bias is gone.

I had been saying (inaccurately) to expect Governor Tiff Macklem and the BoC to keep up the tough talk on inflation at the January meeting. After the December inflation numbers showed an (expected) uptick in the headline number and some (unexpected) tightness in their core inflation measures, I assumed the powers that be would be delivering the same message as before. That message being: 

"We’re not hiking, but we’re concerned about inflation, and we’re going to keep this rate-hike threat hanging over your heads.”

Instead, we got a pivot from whether rates need to go higher to how long they need to stay at their current level. That represents a pretty significant shift in the thought process of the BoC. And one that should inspire a little bit more optimism that we're getting closer to seeing some relief in the form of rate cuts. And anecdotally - that's what we're seeing right now in the market: a little more optimism and activity on the streets. And at some point, that optimism will grow into full-blown confidence when we see that first rate come to fruition.

"The Market" is currently expecting to see rate cuts starting in April. "The Experts" are divided on this, with some thinking we won't see rate cuts starting until June or perhaps July. Whatever happens will be determined by how the BoC weighs an economy that's not growing at all against the stimulus that lower rates would provide to the housing market and consumption. 

So what does all this mean for you?

If you have been debating whether it's time to buy a home, I would wager the window to make this happen without competing buyers is not far from closing. As I said, prospective buyers are optimistic - but cautious. We've seen this movie before. Hope springs eternal that we'll see some interest rate relief soon…only to be kicked in the teeth with more rate hikes (see: Spring 2023). An Ipsos poll determined that 73% of prospective home buyers were sitting on the sidelines due to higher interest rates. But once we see the start of some cost relief, at least some of that 73% will come off the sidelines and test the market. And therein lies the problem with market confidence: once you have it, odds are, most other people do too. And that will increase competition in the housing market.

Whether you're buying, selling, renewing or refinancing, you have questions. And I'd love to help. So, if you, or anyone you know, could use some advice, please connect with us. I would love to help.

All the best out there.