The Bank of Canada is holding interest rates at 1.25% after their April meeting, but they’ve already said they’re going to raise interest rates later this year as soon as the data says it is warranted.  

Why did the Bank of Canada keep rates steady? Because of the tension between multiple factors that could either speed up the economy or slow it down, making it an excellent time to buy.  Contact your Red Deer Mortgage Broker today to discuss your Mortgage options. Let’s look at each in detail.


Canadian exporters are afraid to invest as much as they’d like for fear that Trump’s threats to totally renegotiate NAFTA will lead to tariffs and trade restrictions. Why build more buildings or buy more equipment if there may not be the projected demand for the product? International trade with other countries is steady. Yet Canadian companies are challenged in the global market due to high costs compared to other nations. Capacity constraints are also limiting export growth affecting Canadian cities like Red Deer.  

GDP Growth  

The Gross Domestic Product was originally projected to be growing at 1.6%. That number was revised up to 2% for 2018 and 2.1% for 2019. This is right around the 2% mark that the Bank of Canada considers ideal, though GDP growth faster than this warrants braking in the form of higher interest rates.  

However, their opinion of acceptable growth without the need for interference has changed. For example, the Bank of Canada recently changed its estimation for how fast the economy can grow before inflation is a factor. That value was 1.4%. It is now 1.8%. This means they now think that GDP growth near that 2% rate won’t cause inflation, and there’s no need to raise interest rates unless we actually surpass that 2% growth rate. The revision reflects the assumption that more people joining the workforce and contributing to GDP can cause growth without spiking inflation.  

Debt Loads  

The average Canadian household in cities like Red Deer are struggling under a serious level of debt. This is barely addressed by the regulatory changes intended to slow down the Canadian housing market. After all, limiting the size of a new home buyer’s mortgage doesn’t change what others have to pay for a home they already own. However, raising interest rates would cause those in adjustable rate mortgages to pay more. Those refinancing their mortgages would pay more per month. Credit card debt interest rates would rise. This is why the Bank of Canada is reluctant to raise interest rates and has said that if they do raise interest rates, they won’t follow it up with another rate hike at the next meeting as occurred in 2017. “Most of our deliberations, therefore, concerned the appropriate pace of interest rate increases,” Poloz said at the April, 2018 meeting. 

A slower housing market could hurt the Canadian market, though wage growth and inflation are picking up.  


Canada’s economy is doing rather well. While interest rates may not be increased at the next Bank of Canada meeting, the odds that will happen are very high unless something happens that hurts Canada’s export market to the point it slows down the economy drastically. However, once rates are raised, don’t expect another hike because too many borrowers literally cannot afford it to go any higher.  

Lock in your low interest rate today.  Contact, Jodi Whalen, your trusted Red Deer Mortgage Broker.