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Bank rate cut again in March

The Bank of Canada cut its benchmark overnight lending rate by one-half of one percentage point to 3 1/2 per cent on March 4th, and signaled further cuts in the near future. The trend-setting Bank rate, which is set 0.25 percentage points above the overnight lending rate, now stands at 3.75 per cent.

The Bank warns: “there are clear signs that the U.S. economy is likely to experience a deeper and more prolonged slowdown than had been projected,” and, “deterioration in economic and financial conditions in the United States can be expected to have significant spillover effects on the global economy.”

“These developments suggest that important downside risks to Canada's economic outlook…are materializing and, in some respects, intensifying,” the Bank also cautioned.

The Bank repeated earlier statements that the domestic economy remains strong, while a high Canadian dollar and weakening U.S. economic growth is hurting exports.

“Our high dollar is keeping inflation in check, so the Bank of Canada is cutting its trend-setting bank rate to boost economic growth,” said CREA Chief Economist Gregory Klump. “Financial market turmoil will remain a downside risk to economic growth for some time, and the Bank all but said it will continue lowering interest rates.”

When the Bank decided to lower interest rates on March 4th, the advertised five-year conventional mortgage rate stood at 7.29 per cent. This is less than one per cent above where it stood at the beginning of last year. Competition among mortgage lenders remains stiff, which continues to help many borrowers negotiate discounts from advertised rates. However, fallout from the U.S. sub-prime mortgage debacle has tightened credit conditions in financial markets, resulting in smaller discounts off advertised mortgage interest rates.

Declining interest rates and a rebound in economic growth are factored into the CREA MLS® 2008 market forecast, to be issued later this month. “Sales activity will stay strong and reach the second highest level on record this year. Prices are also forecast to continue rising. Additional cuts to mortgage interest rates are good news for housing affordability and Canadian housing demand,” Klump added.

March 4, 2008 in Arranging Mortgage Financing | Permalink

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Comments

Hi to alls

It is a good post of real estate.I was working on
my canada land for sale which is also real estate site and I felt this situation.

Posted by: Property in Agadir | Mar 7, 2008 3:34:05 AM

Hi, I was working like Toronto real estate agent few years ago. In this article is written a lot about spillover effects and downside risk, however, final consequence is declining interest rates that is good especially for investors. I am not sure that changes in mortgage interest rates can really change global economy.

Posted by: Toronto realtor | Mar 6, 2008 10:03:08 AM

Dear author of the blog,
I am a resident of Toronto, Ontario. I have read multiple real estate books detailing such procedures as 1031 Exchange and taxing procedures. The problem is that all those books talked about the US market. I am looking for similar books that describe in detail the Canadian market. Is there anything you could recommend? Possibly blogs that discuss such topics? Thank you very much ahead of time.

Regards,
Denys

Posted by: Denys B | Mar 4, 2008 11:24:07 PM

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