January 26th, 2022 BoC Maintians the overnight interest rate at 0.25%
The Bank of Canada left the overnight interest rate at 0.25%. The retail prime rate will also remain unchanged at 2.45% (TD 2.60)
Inflation levels were still soaring entering into the first quarter of 2022 however the bank is expecting these to cool to around 3% before year-end.
The bank still believes that the economy has mostly recovered from the pandemic and has implied that they will carefully increase rates this year.
Surprisingly Interest Rates Held At Record Lows
The Bank of Canada shocked the markets today when they decided to leave the overnight interest rate unchanged at 0.25%. Maintaining the overnight rate goes against the market projection which stated the chances of a rate increase at 85% heading into today's announcement. According to BNN, there is now over a 90% chance that a rise in rates will happen at the next meeting in March.
The Central Bank is in a very tough position.
They need to raise rates to handle rapidly increasing inflation levels while being aware of households and businesses that have struggled for the last few years. Raising rates too abruptly could result in triggering a recession.
What does this mean for mortgage rates?
Fixed-Rate Mortgages
Controlled by the government of Canada's 5-year bond yield fixed-rate mortgages have been on the rise for over a month inching close to 3%.
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 and how rapidly will it happen?
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 still 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.
The next BoC rate announcement is scheduled for March 2nd, 2022