Mortgage Rates & Mortgage Broker News in Canada

Bank of Canada Rate Biases

When the Bank of Canada talks rates, analysts hang off of every word. They pay special attention to biases in the Bank’s wording (i.e., which way the Bank is leaning on interest rates).

The media loves to pump commentators for predictions on whether the BoC will keep its rate “bias,” not keep its bias, do something unexpected with its rate bias, and on and on. It’s quite the drama over what is usually a 1-3 sentence statement in a BoC press release.

On Wednesday, the Bank of Canada left Canada’s key rate alone. It also chose to leave its 13-month-long rate hike bias intact, saying:

“…the considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required.”

The question some may be wondering is, should this sort of statement mean anything to the average mortgage consumer?

No Action from the BoC

There was no rate change to report from the Bank of Canada today, and nobody expected one.

Canada’s base interest rate remains at 1.00%. It has held that level for 952 days, an unprecedented stretch of flat monetary policy.

The Bank of Canada’s Mark Carney continues to maintain that “the next move (in rates) is likely to be up.” That so-called “tightening bias” has been in place for more than a year.

But if the next move is indeed up, it won’t be happening this year—that is, if you believe the forecasts of virtually every economist in Canada.

BoC Decision: Lower for Even Longer

Canadian macro-economists are mostly in agreement that the overnight rate should go nowhere in the next 9-12+ months. And the Bank of Canada gave no indication today that such projections are off the mark.

The Bank left Canada’s core lending rate unchanged at 1% for the 29th straight month, with no change in sight.

Higher Rates “Less Imminent” Says BoC

The Bank of Canada surprised most analysts today by cutting Canada's 2013 growth estimate (to 2.0%) and calling the timing of the next rate hike “less imminent than previously anticipated.”

The BoC has used the “less imminent" wording before, but not in any recent rate decision statements. It attributed its position, in part, to “more muted inflation” and cooling household debt levels.

The decision leaves Canada’s prime rate stuck at 3.00% for the 27th straight month—to the delight of most variable-rate mortgage holders.

The BoC Rate Meeting: Nothing to See Here

Today’s Bank of Canada rate announcement was another yawner. No one expected rates to rise. Analysts merely wanted to see if the Bank would drop hints on its future rate-setting plans.

It did, but the new clues weren’t much different from its previous guidance.

For mortgage watchers, the long and short of it was this:

• the Bank maintained its rate tightening bias, but
• short-term mortgage rates (which the BoC controls) are unlikely to jump near-term.

Rates Stay Put as BoC Keeps Rate Hike Bias

Mortgage holders won’t find much to fret about in today’s statement from the Bank of Canada.

The Bank left its policy rate unchanged, which means that prime rate should exit 2012 at the same level it’s been for 25 months, 3.00%.

Carney & co. said that, “Over time, some modest withdrawal of monetary policy stimulus will likely be required.” That’s vaguer than prior projections but still a signal that the next rate move should be up.

Here’s more from the Bank’s statement this morning:

It’s Status Quo With the BoC

Carney and company have again left Canada’s trendsetting overnight rate as is. That leaves prime rate steady at 3.00%, with no change in sight.

It’s been two years now since prime last inched higher, giving variable-rate mortgage holders an unexpectedly long vacation from higher interest costs.

In its statement today, the Bank said:

The BoC’s Coté On Risk & Household Debt

Since the credit crisis, the Bank of Canada has stepped up efforts to quantify the risk lurking in our financial system.

Deputy Bank Governor Agathe Côté spoke about this Tuesday. She explained how the BoC models risks and provided the following factoids on Canadians’ debt exposure.

Canada’s Key Interest Rate Stays Put

Once again, Mark Carney and committee have left Canada’s core interest rate unchanged.

The overnight target rate has now been static for a record 678 days.

Our economy still isn’t firing on all cylinders, says the Bank of Canada. This suggests that mortgage holders can likely expect the 3.00% prime rate to remain as is for a number of months.

Simulating Economic Hazards

Rising indebtedness has elevated concerns about the ability of borrowers to cope with economic stress.

The Bank of Canada (BoC) weighed in on this topic last week. In its semi-annual Financial System Review, the BoC performed a variety of simulations to estimate how job losses and rate hikes might prevent some people from paying their mortgage.

Here are some of its findings:

Overnight Rate Held Steady

The Bank of Canada has left its policy rate as is, at 1%.

In today’s rate announcement, the Bank also toned down hints that it may resume rate hikes sooner than expected.

What it didn't do, however, is remove a key statement from April about future rate increases being necessary.

Here’s more on that, and highlights from the BoC’s public release (our comments in italics):

BoC Hints at “Withdrawal of…Stimulus”

The Bank of Canada held the line today and left the country’s pace-setting overnight rate at 1%.

The news, however, is not what the BoC did, but what it hinted at doing.

Governor Mark Carney and co. jostled expectations in their prepared statement, which said:

Canada’s Key Rate Stays At 1.00%

Once again, the Bank of Canada left the country’s key interest rate unchanged today at 1.00%. That’s where it has stood since September 2010.

In turn, prime rate should remain at 3.00%, making today’s BoC meeting mostly inconsequential for variable-rate mortgage holders in the near-term.

Economists were looking to the Bank’s official statement for changes in its tone. Here’s what it said:

No BoC Rate Change for 16th Straight Month

Canada’s key interest rate will begin 2012 exactly where it’s been since September 2010 – unchanged at 1.00%.

It's the longest stretch on record without a Bank of Canada rate change.

Economists didn’t expect the BOC to move rates at this meeting. Instead, they were looking for any change of language in the Bank’s official statement. As usual, there were a handful of conspicuous statements in that release. The BoC said:

Short-Term Rates Stay Put

Canada’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.”

No Change for Key Rates

The Bank of Canada met today and saw no reason to move its key lending rate from 1.00%, where it has been for a little over a year.

That's precisely what the market anticipated and it means prime rate (which is the basis for variable mortgage rates) should remain at 3.00%.

The BoC’s decision comes amid ongoing economic danger in Europe, sputtering U.S. growth and surprising inflation here at home (core inflation hit a three-year high in September).

Here’s a sampling of the Bank’s commentary from this morning:

No Change to Rates

The Bank of Canada kept Canada’s key lending rate at the same place it’s been for a year: 1.00%.

As a result, variable-rate mortgage holders can expect prime rate to also stay put at 3.00%.

The BoC said this about its decision:

Deciphering The BoC's Hieroglyphics

When it comes to the future of interest rates, the Bank of Canada (BoC) is cryptic. It rarely comes right out and says what it’s thinking because that could disrupt financial markets.

Instead, the BoC plants clues in its public statements.

BoC Leaves Key Rate Untouched at 1.00%

The Bank of Canada startled no one today by leaving its key lending rate unchanged at 1.00%.

The BoC has been in a holding pattern for almost 10 months now, keeping prime rate at 3.00%—to the benefit of variable-rate mortgage holders.

A Reuters survey of 37 economists conducted prior to this announcement was unanimous in predicting today's rate hold.

All eyes quickly focused on the BoC’s official statement. Analysts say it included more hints of a rate tightening mindset. Here are highlights from that report:

Economists: Rates to Remain on Hold

Despite robust headline inflation and growing employment, the market expects no rate change when the Bank of Canada meets Tuesday.

A drab North American economy, strong loonie, and European debt concerns will keep rate hikes at bay, according to all 37 economists polled by Reuters. Not one of them expects a rate change until later this year or early 2012.

The overnight rate has now stood at 1.00% for nine months.

Here are some soundbytes about Tuesday’s rate announcement: