Ottawa, September 8, 2010 - The Bank of Canada raised its key interest rate by a quarter of a percent today, for the third consecutive time this year.

The Bank noted in its announcement that it “now expects the economic recovery in Canada to be slightly more gradual” than it predicted at the time of its last rate hike in July, citing weaker economic activity in the U.S.  However, the Bank also stated today that consumption growth in Canada “is expected to remain solid and business investment to rise strongly” supported by “accommodative credit conditions, which have eased in recent weeks mainly owing to sharp declines in global bond yields.”

The country’s major commercial banks quickly followed suit, also raising their prime lending rates by a quarter-point to 3%.

Economists’ interpretations of the central bank’s statement were varied, with some suggesting it signaled a long pause ahead. Others warned of another rate hike as soon as October. However, the majority of analysts surveyed think rates will remain on hold for the rest of this year.

Pricing on many fixed mortgages for new borrowers has been edging down in recent weeks.  A competitive rate for a five-year fixed mortgage is now available at 3.89% for qualified borrowers.
A competitive variable rate mortgage is available to qualified borrowers at 2.35% (prime of 3% minus 0.65%), factoring in the Bank’s rate increase today.

Mortgage holders or potential borrowers should contact their real estate agent or a mortgage professional to discuss interest rate trends and the impact on affordability, and which mortgage strategy fits their needs.