December 8th, 2020 BoC maintains the overnight interest rate at 0.25%

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As expected the Bank of Canada announced this week that it will be maintaining its overnight interest rate at 0.25%. The retail prime rate will also remain unchanged at 2.45%

• Markets are showing high inflation levels however the bank is expecting these to cool hitting the expected target of 2% mid-year.

• The bank still believes that the economy still needs some support with low rates for the time being.

In this last meeting of the year, the central bank left the overnight rate unchanged at 0.25% as most experts expected. The BoC is now unable to call the strong inflation displayed for more than half of 2022 'transitory'. The recent inflation trends combined with strong employment increases are signals that they will need to address the markets with a rate hike in early 2022. The Canadian economy is well on its way to recovery as much quicker than expected with recent jobs data crushing the estimated projection of 40,000 new jobs by 113,700 adding a total of 153,700 in November. If you read the full press release the bank uses a much softer tone when addressing a potential rate hike in 2022. The bank acknowledges that inflation is creating pressure for a rate increase however they still believe that this will resolve itself mid-year 2022. This viewpoint means that they will keep stimulating the economy by keeping rates low, for at least the time being.

What does this mean for mortgage rates?

Fixed-Rate Mortgages Controlled by the government of Canada's 5-year bond yield are already reacting to the anticipated BoC rate hike in 2022. Current 5 year fixed rates range from 2.64% (insured) - 2.89%(uninsurable) Variable Rate Mortgages These mortgages are still low ranging from 1.15% (insured) to 1.45% (uninsurable) Don't know what insurable and uninsurable mortgages are? Click here A rate increase is inevitable in 2022, the question is when will BoC pull the trigger and how many shots will be fired? If you are currently in a variable rate mortgage and are thinking of locking it in, I would be more than happy to discuss your situation in a call anytime. In most circumstances, the spread between fixed-rate and variable-rate mortgages is much too large right now to save money in the big picture. If you would like to learn more about mortgages, discuss your position, or learn more about this announcement please reach out to me anytime. You can book something directly into my calendar by clicking here. Happy Holiday's, and all the best in 2022, Kirk Fournier The next BoC rate announcement is scheduled for January 26, 2022