December 6th, 2011

Short-Term Rates Stay Put

Bank-of-Canada-Benchmark-RateCanada’s key interest rate will end 2011 unchanged.

The Bank of Canada left its policy rate at 1.00% today, as anticipated.

In a statement, the Bank said European economic performance will be worse than expected, Canadian and U.S. growth are “slightly” better than expected, and inflation will “ease.”

It added: “With the target interest rate near historic lows and the financial system functioning well, there is considerable monetary policy stimulus in Canada.”

Following the announcement, BMO economist Doug Porter told FP: “…I don’t really sense much of a change at all in the bank’s overall view.”

The bond market, which leads fixed mortgage rates, apparently agrees. Yields changed very little in reaction to the BoC’s decision. (5-year bond yield quote)

The next BoC rate meeting is January 17, 2012. As of today, financial markets are pricing in a 10% chance of a rate cut at that meeting and 90% chance of no change, according to Bloomberg.

Rob McLister, CMT

11 thoughts on “Short-Term Rates Stay Put”

  1. I would recommend to contact a mortgage adviser – like Rob and Melanie – at
    You can only benefit from a free advice and service especially with first mortgage when you’re so excited that you miss many of the important things to consider.

  2. I am being realistic. How can you give proper guidance with no information on the borrower?
    What advice would you provide in this case BP?

  3. BH and Observer are both right: consult a professional, and be clear around your appetite for risk…
    That said, the spread between fixed options and variables is pretty tight right now, and no one knows what’s down the road (5 year Gov’t of Canada bond rates closed at an all time low yield today!) A fixed rate right now is probably not a “mistake”: for a small premium now, it allows you to sleep soundly for however many years you choose …

  4. Wooohoo – Canadian bond yields hit record lows today, both at the 10-yr (1.98%!) and the 30-yr (2.58%!). I think the 5-yr yield tied its all-time low from a couple of months ago (1.25%).
    Low rates will juice the housing market here for at least several quarters to come … the only caveat to this is if Europe falls apart and a global recession begins – then I think the housing market here could suffer modestly.

  5. If the mortgage rates is to fall… let’s be realistic; say 1/2 a basis point: How much of that will surface to the average mortgage holder or will the system just eat the rate change up. If that is the case… how much of a rate change needs to happen to affect the average Joe?

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