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
The Bank repeated earlier statements that the domestic economy remains strong, while a high Canadian dollar and weakening
“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
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.