Last week Bank of Canada (BoC) Governor Poloz eliminated any doubt about the BoC’s near-term plans. During an interview on CNBC he said that the two 0.25% overnight-rate cuts that the Bank made in 2015 in response to the oil-price shock have “done their job” and he expressed confidence that our economy’s “surprisingly” strong first-quarter growth rebound would continue.
The market’s reaction was swift.
The futures market raised the odds of a BoC rate rise at its July meeting to better than 50% and the Loonie soared against the Greenback, reaching a nine-month high. Government of Canada (GoC) bond yields surged higher and mortgage lenders wasted no time, quickly raising their fixed rates, which are priced on GoC bond yields, in response.
This marks a rare moment for many of our variable-rate borrowers because the BoC hasn’t raised its overnight rate in more than seven years, which means there are many among this group who have never experienced a rate rise (this is the part where the older generations shake their heads).