April 16 2020 Bank of Canada Rate Decision

Wednesday, April 16 2020 the Bank of Canada made their scheduled rate decision deciding to leave the Key interest rate unchanged at 0.25%. The decision to maintain a 0.25% was expected after the key interest rate drastically plummeted in a tumultuous month of March.

Last month globally we witnessed one of the most economically unstable months in history triggered by the covid-19 pandemic. The repercussions of the economic downturn caused the Bank of Canada to decrease the key interest rate on three separate occasions by 0.50%. Covid-19 has caused the Canadian economy to shrink at rocket ship speed. As a response to this the Bank has indicated that they do not intend on lowering the rate again and instead will motivate the economy with other stimulus programs. Official bank statement here.

What does the Bank of Canada’s decision mean for my variable rate mortgage?

The banks have passed down the recent key interest rate drops to the retail prime rate. The current retail prime rate is 2.45%. If you are currently in a variable rate mortgage now would be the time to convert to a fixed. If your payment has dropped with prime the prime rate and you are in a position to increase your payment back to the amount paid in Feb now would be a good time to take advantage of your prepayment options. The extra money will go directly to the principal decreasing the interest charge and amortization period of the mortgage.

What the deal with rates?

The government has worked hard to keep the cost of borrowing money low but due to international economic uncertainty rates are higher today than at the beginning of March.

On March 1st the average 5 year fixed rate was 2.54% today that rate is averaging 2.94% Along with this the variable rate on March 1st was prime -.70% and today is now Prime +.20%.

I would be more than happy to discuss all of your mortgage options with you at anytime. Please feel free to schedule a call in the link below.

https://www.mbyk.ca/book-a-call