Refinance Before July 15th Interest Rates Announcement

Canadians seeking to refinance their mortgages may wish to act before July 15th, when the Bank of Canada is scheduled to announce what if any adjustment it will make to its main overnight lending rate. (The Bank of Canada's overnight lending rate is the interest rate at which financial institutions lend and borrow money amongst themselves. The BofC's overnight rate tends to set the rate for that market and is, perhaps, the key tool that the Bank of Canada uses to affect monetary policy and control inflation.)

"A rate hike could be in the offing in Canada," according to a report in today's Financial Post, "but economists say it is unlikely that, Mark Carney, the Bank of Canada's governor, will pull such a trigger when the bank issues its next interest-rate decision on July 17."

However, Governor Carney and other officials at the Bank of Canada have been consistently voicing their concerns about increasing inflation in the Canadian economy that is spurred on by rising gas and commodity prices. On June 10th, the last scheduled date to adjust the Bank of Canada's overnight rate, the BofC Governor defied industry expectations, keeping its main interest rate where it was in order, most feel, to stave off inflation.

With the Bank of Canada again scheduled to announce any change to its main lending rate on July 15th, it would not be surprising to see Governor Carney again defy industry expectations and raise its main rates by perhaps .25%. This would force prime lending rates up and increase borrowing costs for Canadians who need to refinance their mortgages. Better to act prior to the July 15th Bank of Canada rates announcement to ensure that you are not facing higher interest rate costs on your mortgage after that date.

There is a growing consensus that the Bank of Canada's focus has shifted from one of keeping rates low to stimulate the economy to, at least in the short term, an overarching concern with keeping inflation in check. Paul Ferley, assistant chief economist at Royal Bank of Canada, told the Financial Post as much, noting that, "The continuing deterioration in the outlook for inflation is consistent with the recent shift in tone at the Bank of Canada with increased concern being raised about the inflation outlook."