The news before Brexit had been that rates were expected to rise, but as I, and many others have said, that always assumes nothing new happens to change the plan. Brexit changes the plan. Not only has the UK currency dropped off a cliff, global markets went on a crazy downward spiral, but what does it mean for mortgage rates?
If they were going to raise rates the economies of the world and particularly North America would have to be steady, solid and are on an upswing, and while Europe is not Canada's largest trading partner you cannot slam that many "rich" countries and not have some kind of global falling of the dominoes. As angry as the Europeans are at Britain, and as shocked as Cameron might be that his silly gamble to resolve internal party disagreements has now led to a global crisis, the world needs and wants some stability, so "the powers that be" will work at making the ride as smooth as they can while still slapping Britain on the wrist. The odds are also strong that Scotland will now separate from England and Northern Ireland may join the south, ending many, many years of another type of disagreement. (It helps that the rule of the RC church is also losing some grip on the laws of the Republic of Ireland making it easier for the Protestants to consider joining.)
So economic turmoil tends not to lead to stronger economic growth, which in turn lowers the pressure of the bond markets, and the Bank of Canada to raise rates.
The bottom line is that anything that is bad for the global economy is going to keep rates low, which is great for borrowers, but tough for the unemployed and also making it tough for governments to raise revenue without increasing tax rates to meet much needed infrastructure and other spending needs.
On the housing side the government therefore will be turning to other tools to tackle the insanity of the Toronto and Vancouver housing markets, so I will be keeping an eye out for more changes to the mortgage rules in coming months.
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