The U.S. decision to hold short-term interest rates near zero through 2014 – 18 months longer than expected – suggests the Bank of Canada now has little choice but to do the same, giving consumers – and brokers – more time to dally in the current low-rate environment, say analysts.
While the U.S. Federal Reserve is projecting continuing economic growth this year, 2.7 per cent, and next, 3.2 per cent, it remains convinced that the troubled jobs and housing markets will continue to challenge spending by both businesses and consumers.
By projecting a longer horizon for low interest rates, it mean to keep the current level of stimulus in place and -- fingers crossed -- encouraging spending.
It may or may not work, said economists Wednesday, following the announcement, but either way drag in the U.S. recovery will likely to hamper Canadian growth.
That would encourage the Central Bank to keep its own overnight interest rate near historic lows, according to Canadian analysts, although not likely as long as its American counterpart.
If the Loonie remains strong, the BoC could hold off edging up that rate as late as 2014, CIBC economist Avery Shenfeld told reporters Wednesday. “Those who have borrowed heavily can take some comfort that they’re not going to be beaten up by a sharp rise interest rates anytime soon.”
Still, that extra time with low rates won’t necessarily benefit mortgage professionals grappling to get buyers off the fence and into the market.
“What I’m experiencing – and what I’m hearing from other seasoned brokers in the Vancouver area – is that we keep checking in with preapprovals and we’re having to roll more of them over because despite the low interest rates clients are in no rush to buy,” Morris Briglio, president and senior mortgage consultant with The Mortgage Advantage, tells MortgageBrokerNews.ca.