Oil and your Mortgage Rate
Relationship Status..."It's Complicated"!
Who knew there was a connection in the price of oil and your mortgage rate? Well, there is, but it is a long and winding road.
Because oil is a major component in Canada's economy, accounting for a significant part of Energy exports, and is now selling for much less than it was just a few months ago, it is having an impact!
The bad part about lower oil prices is that it means the main driver of employment in Canada - the Alberta oil patch - is likely to slow which means less royalty money for government which all leads to employment concerns. Employment is one of the key indicators the Bank of Canada watches when determining interest rate policy.
Falling oil prices tend to have a negative effect on Canada's economy which will cause downward pressure on Bank of Canada rates. This tends to affect variable rate mortgages. The further impact on our economy tends to keep government bond yields low which is what affects fixed rate mortgages.
Who knows how long oil prices will drop, but we are starting to see some reduction in interest rates already, so if you are in the market to buy, rates are low and holding steady!
Posted by Kim Reddin
on January 15, 2015