One question sure to be on the minds of many Canadians is whether or not interest rates will rise in 2016? Since the prime rate set by the Bank of Canada (BoC) has continued to drop, including the further dip it took back in July – many individuals wonder whether or not this points to the likelihood of the interest increasing after reaching all time lows.
The truth of the matter is however, there are conflicting views as to whether or not the interest rate will rise or remain the same – or even fall further in the upcoming months.
Coinciding with the sluggish Canadian economy, many believe that the interest rate will remain low as long as economic growth remains stagnate. From this perspective – since the economy has not bounced back and as some financial experts have predicted – this further adds to the belief that rates will not rise any time soon.
With that being said, this does not mean that rates won’t necessarily increase at a later point in time. As the BoC has also predicted that the economy’s inflation will start to finally see that growth in 2017, that may also be the same time when Canadians see the prime interest rates increase.
Many reasons have pointed to the fact that the economy has ceased to grow, such as soaring housing prices, rising oil prices and increased demands. That being said, it is also the growing national debt the has many Canadians struggling to get a hold of their finances – not to mention facing extreme challenges with regards to getting onto the property ladder.
Even however, with the lower rates, the high price of houses still makes it very difficult to buy a home in these booming markets. In response, many major cities such as Vancouver and soon-to-be Toronto are taking steps to find more of an affordable balance in the housing markets, such as the foreign buyers tax – this is one such area where interest rates play a larger importance.
None-the-less, the country as a whole is likely to see overall economic grow – with the hopes that debt-to-income ratios also become more manageable then they have currently been. All in all from this standpoint, with the potential for economic growth on the horizon, the BoC may in fact respond in kind with a higher interest rate, knowing that it won’t likely leave Canadians with an even greater financial burden.
On the other hand, if those who do believe the rates will remain the same or sink even further – it is suggested that only a small dip from 0.50% down to 0.49% will occur by the time 2016 rolls around. So, while of course this does not mean that rates will stay low for a whole lot longer, it does mean that a rise even as high as about 0.75% in 2017 is also an outcome that is just at likely.
With the Bank set to review the current economic forecast sometime this month, these details can provide some well-needed insights into the future of our interest rates. Canadians can have a better idea of what to expect in terms of whether or not the rate will in fact increase – and of course, to better pinpoint when this possible increase is more likely to occur.
Ultimately, while it does appear that while the Canadian interest rates is likely to increase . . . there is certain evidence that however points to an raise in the rate later in 2017, however not until 2016 has already come to a close.