BoC January 2021 Rate Announcement

How do these bank meetings affect me?

The Bank of Canada meets eight times a year to set the Benchmark interest rate or overnight rate. This rate is used to determine interest rates Canadian's get on mortgages, credit lines, savings accounts and other products.

If the bank wants to stimulate the economy they cut the rate. This encourages borrowing and investing. When they want to slow down the economy they increase the rate.

What happened today?

In the weeks leading to today's announcement, some analysts were predicting that the bank may make a micro-cut to its overnight rate however, the bank held tight maintaining the rate at 0.25%

This really should not come as a surprise to anyone as the bank has been extremely candid with the public stating the rate will not change until 2023.

The bank is also keeping pace with the Quantitative Easing program by continuing to inject $4 billion dollars a week into bonds.

What does this mean for mortgages?

If you have a variable-rate mortgage your current interest rate will not change and as mentioned is not projected to rise until 2023.

If you have a fixed-rate mortgage today's announcement has no impact on your current payment until renewal. If you are up for renewal before 2023 it's unlikely that rates will increase drastically before then but especially while the bank is purchasing bonds at the current pace.

Why did the bank decide to keep rates at current levels?

The bank has mentioned in the past that they do not expect our economy to get back to pre-pandemic levels until our inflation rate is able to stabilize at 2%. We are currently well off this target. You can read more about inflation in the full report below.

The latest lockdowns combined with delays in the vaccination schedule also create economic uncertainties. Until we are able to fully reopen and confidently return to normal life it is doubtful that the bank will make any changes to either the rate or the quantitative easing program.

Now maybe a good time to talk mortgage!

Now is a great time to have a conversation about mortgages. Whether you have one now or are looking to get one in the future, with rates at all-time lows you have many options.

If you have any questions about today's Bank of Canada's announcement or anything else mortgages, remember that my door is always open and I love to talk mortgages!

Click here to book directly into my calendar