Bank of Canada Rate Outlook 2021 and Impact on Mortgages

January 11, 2021 | Posted by:

Bank of Canada Rate Outlook 2021 and Impact on Mortgages

The Bank of Canada (BoC) has not made a prime rate announcement as we enter the second week of 2021 but they did just release their Business Outlook Survey covering the remainder of the winter. From this we can draw conclusions about what will happen with the mortgage and real estate market. Let’s review.

What The Current Bank of Canada Business Outlook Survey Infers About Mortgage Rates  and Real Estate Sales to Come in 2021

Improved Business Sentiment

Through the summer and autumn Canada’s economic outlook for the near future looked downright dismal. However, the Q4 arrival of the COVID-19 vaccine sparked an improvement in business sentiment despite even the recent shutdowns in many Canadian provinces. While it’s true that not all sectors are feeling positive (especially the hospitality sector) the general improvement in how the economic outlook is perceived may incite the BoC to rethink their stance (from December) to maintain the current policy rate until their 2-percent inflation objective is achieved. But even if they hold steady on the rate, we have predicted that lenders will not do the same when it comes to mortgage rates. Any indicator of a positive outlook will spur them on to at least raise fixed and variable rates from the bottom floor that they now rest upon.

Firms Expect Revenue Increases in the Next 12 Months

The sentiment addressed above is expected to equate cold hard revenue in 2021. Firms from a large variety of B2B and B2C industries forecast a significant growth in sales. The real estate industry is among them, and in Winnipeg you can expect more of the same. Despite the most challenging economic time in recent history home sales in Winnipeg have been breaking records. With more money flowing into the economy and low (even with moderate increases) mortgage rates, home sales throughout Manitoba will see increases along with other products and services.

Stronger Investment and Hiring

With improved business sentiment and sales forecasts business have pledged significant investment and hiring for 2021. More Canadians (and Manitobans) will be back to work and looking to invest in a more secure future. This will drive more households into the real estate market, but take note that in Winnipeg inventory is getting slim. Be sure to begin the mortgage pre-approval process in January or February at the latest to get a jump on more desirable properties.

Businesses Plan to Raise Prices at a Faster Pace

This is the logical economic response to the 2020 recession, and it is spurred on by the vaccine and positive outlook. To recoup what was lost, businesses absolutely plan to raise prices. Sure, this is also true in the Winnipeg real estate sector, with buyers already paying a premium (albeit more affordably than all other large cities in Canada). However, be prepared to see an increase in the cost of complement products and services. The cost of furniture, appliances, home electronics, along with services such as interior decor and design may also increase as industries look to get back what 2020 took away. Once again we see a cause to make your move into the market within the first fiscal quarter of 2021, instead of waiting for the eventual rise of the economy.

“The Business Outlook Survey indicator continued to recover and turned slightly positive, signaling improved business sentiment. This reflects the fact that many indicators moved up as economic conditions partially recovered from extremely low levels seen earlier in 2020. Employment and investment intentions saw the largest increases since the autumn survey. Robust foreign demand, improved confidence related to vaccines, and ongoing government relief programs all contribute to the improved outlook.” (Bank of Canada Business Outlook Survey, January 11 2021)

Contact Ron Chan today at 204.290.9950 to talk about the outlook for YOUR mortgage in 2021.

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