No BoC Rate Change for 16th Straight Month

Bank-of-CanadaCanada’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:

  • “The outlook for the global economy has deteriorated (since October).”
  • “…very favourable financing conditions are expected to buttress consumer spending and housing activity.”
  • “…the ratio of household debt to income is projected to rise further.”
  • “The economy is only anticipated to return to full capacity by the third quarter of 2013, one quarter earlier than was expected in October.”
  • “With the target interest rate near historic lows and the financial system functioning well, there is considerable monetary policy stimulus in Canada.”

Analysts reading between the lines say the Bank’s statements imply low odds of further rate cuts anytime soon.

In fact, the next BoC rate meeting is March 8, 2012. The financial market (overnight index swap market) is pricing in no rate change at that meeting, with just a 12% chance of a cut.

From a mortgage standpoint, the immediate result of all this is that prime rate should remain at 3.00%. That means payments stay the same for existing variable-rate mortgage holders.

Rob McLister, CMT

  1. Thank u Mr. Carney…us variable folks thrilled at no change…but insurance companies are crying….ditto banks who want them rates to go up up up….too bad boys

  2. All we need is a default in Europe now and we could see that 0.25%…lol Those Europeans think that austerity measures will solve their problems, but everyone knows that Europe is the “oldman of the world!” When will they just end it so the rest of the world can settle down.

  3. rates should stay that low, screw the banks ;) they must reduce their CEO bonuses and their books will be just fine.

  4. Well do you guys think that a closed variable mortgage is still a good option? Keep it until rates start going up? (2-3 more years)

  5. John, If you like variable, I would get a 1-2 year fixed and wait for the discounts to come back in about 18 months.

  6. to mortgage diva:
    18 months eh? so can I infer that to mean in 18 months u think the fixed rates will start going up again and the variable discounts will start coming down …dont things always perk up around the american election in november?…which is about nine months away..thanx

  7. I highly doubt in 18 months anyone of us will know where fixed rates are. I would suggest more of the same. A sideways market with no real direction and further economic and political bumps….major uncertainty. Take control of your financial situation as this is the time! ps – have you seen where longterm rates are? 7-10 year terms under 4%. WOW

  8. td banker
    yea thanx…used to be with TD back in the day….i like that 10 year one……it is def a wow….

  9. I just scanned the bank rates…i dont think the banks get it…maybe the ceo’s need to cut short their holidays in palm springs and get their head into this….rates are going down down down…check out ing…why on earth would anyone renewing or buying a place go with a bank when they can get it cheaper elsewhere…like talking to a mortgage broker….like i was lucky enuf to do way back when when i thought banks were gods…uh, am i missing something here…hey banks wake up….get in the game….

  10. Always ask yourself, “Why would the banks reduce their rates?” The answer: They know the SHHTF around the world and “real” prices have gone up, Europe is in a “suicide pact” with their austerity measures, and people have too much personal debt. Rates will stay the same through 2012. If any European nation defaults (Greece is getting worse by the month), rates will go down to keep people spending. Also, people have forgotten that America’s AAA to AA+, and could be reduced again within two years if nothing changes with the US budget (nothing will change with election this year). Nevertheless, take advantage of the low rates and pay off your mortgages, or ride the variable if u have a smaller mortgage and some savings to support you through any major family emergency.

  11. hey steve:
    i like what u say…..and i agree with it…but consider this…at one time banks were the choice for everything from mortgages to savings to rsps and whatever…now folks are shifting away from banks…..we just dont see them as I dont know…church figures anymore….folks in canada may have a hi debt ratio as carney said today but thats not because we are spendthrifts…god no way…we canucks are a frugal lot…its because we are paying a fortune for our houses so why in hell wouldnt we want the best mortgage rates available…banks aint doing that so folks like me are looking elsewhere and thank gawd for sites like this and i hope first timers patch in here and seek out a mortgage broker for the best deal on their first home…i was lucky enuf to get one and i want to pass that on…best thing i ever did was get a broker who got me a non bank mortgage….

  12. average joe: non bank mortgages can be restrictive, have penalties, shorter amortizations and etc. I often have clients who complain how their broker tried selling them a product/rate which they could not be approved for near completion and end up with something totally different……Great it worked for you but 1/3 Canadians Bank with TD for example (not only their mortgage) and would prefer a Bank mortgage due to more important keys drivers besides rate…. ex) a branch they can walk into, long hours, dedicated advisors, face to face advice & advisors who are not commission motivated….we all know how that works!

  13. TD banker
    good points and i have an acct with td…good bank….but in the long run it all boils down to rates….nice to have folks to talk to but dont wanna pay a premium on my mortgage for that….banks have to change…they seem to be doing so but reluctantly…b of m offering sweet rates but then saying, folks you have like 27 minutes to make up your mind…its a huge life decision and folks dont like being pressured like that….when i went for my first mortgage my bank wanted to ding me with a first, a second, even a third mortgage….went to a broker got a mortgage immediately and a nice rate and no second one or third one or fourth one or whatever “my bank” tried to ding me on…

  14. Chris’s top 10 reasons NOT to get a mortgage directly with the bank:
    1. Bankers cannot match an experienced broker’s market knowledge. Thanks TD Banker for reinforcing this!
    2. Bankers apparently like to spread misconceptions to get your business. Thanks again TD Banker for making my point here. Nice story about bait and switch.
    3. Bank mortgages are often the MOST restrictive. See BMO’s lowrate mortgage and TD’s collateral charge. Banks also have the WORST IRD penalties in the business because they use posted rates!
    4. Bank rates are normally higher than broker rates. Everyone knows it and the Bank of Canada proved it last year.
    5. TD, BMO, RBC, Scotiabank, CIBC and National Bank have 30 year amortizations maximum. No major bank has 35 and 40 year amortizations.
    6. Bank branches are irrelevant for mortgages. There is NO need to waste time driving to a branch and getting sales pitched on every product in the bank. You can do everything you need to do online or by phone, without having to navigate endless phone prompts and waiting on perma-hold.
    7. Bank specialists are commissioned. They get paid MORE if they sell you a higher rate.
    8. Most bankers change jobs every few years. Established brokers will be there for you when you renew, supporting and servicing you all along the way.
    9. Brokers spend all of their time on mortgages and are TRUE specialists. Branch reps like to dabble in chequing accounts, mutual funds, GICs, you name it.
    10. Most important of all, bankers have only ONE brand of mortgage. All you get is whatever your banker has to sell you. Bankers never promote (and often don’t know about!) mortgages with less strings and lower rates.
    If you’re a banker who wants to go head to head on these points please make my day and post here.

  15. ATTA BOY CHRIS!!!!
    10 pts for all those folks lookin to get a mortgage to read….i dont want my mortgage broker to know all about the latest chequing accts duh…..i want him or her to help me decide when to jump if i’m variable or how long term to go etc….i had only one experience with a bank trying to get a mortgage and it was a game changer…i told the lady banker who tried to hit me with a first, second and third mortgage it would be cheaper to go to the mob…

  16. People with multiple posting names have no credibility on this board.
    (average joe-np)
    Chris-Approved, when you post under your real name and stay on topic, then maybe we will take what you have to say seriously.

  17. You post under “old time reader” and you’re lecturing me about using a real name?
    How many other pseudonyms do you go by?
    And who is “we”? You?
    Sorry Oldie but aspiring to your approval doesn’t top my to-do list. If the forum rule book says I’m not allowed to respond to some bank rep’s deluded comments, please point me to those rules.

  18. Chris-Approved:
    1. I’m a Banker with extensive knowledge of financial markets with my BBA Major being Finance backed with a Personal Financial Planning designation. 2. Not sure what fine print you are confused about 3. How is a TD OPEN variable mortgage or home equity option restrictive? Brokers do not have access to this product by the way 4. The Bank of Canada proved what? TD offers the most competitive and unrestrictive line of mortgages ie open mortgage 5. TD, BMO, RBC, Scotiabank, CIBC and National Bank have 30 year amortizations maximum. No major bank has 35 and 40 year amortizations. Yes because we support the governments recommendations/policy changes set in place earlier. There’s more important issues than just trying to qualify your client for a mortgage
    6. Bank branches are relevant for my portfolio of clients over the age of 50 who like sitting down with an advisor and would rather not be talking to an automated service or using the internet….we make all options available to our clients.
    7. Bank specialists are commissioned and more importantly do not charge broker fees. 8. I’ve seen many brokers leave the business over the years.
    9. Mortgage Specialists are also true specialist and I dont have to cap lock my comments to get my point across
    10. Mortgage specialists have access to bank mortgages ie TD and also have a TD alternate lending channel…. for example TDFS,,,thats TD Financial Services, etc
    read the above notes carefully and notice again I did not have to use caps lock to get my points accross…ty tdbanker

  19. tdbanker, with all respect, it doesn’t sound like you’re a “Banker”. A true “Banker” is a person employed as an Executive. That’s big tower, executive floor, corner office, executive car, fat bonuses, Board meetings and your signed name on the annual report.
    As for why chris-approved uses caps to get his point across, let me help you out, its OBSERVER under yet another new pseudonym! Obviously he doesn’t like following the posted board rules below or maybe muppets can’t read? I can’t figure out which!

  20. when the comments are valid, informative, helpful, interesting, controversial, insightful, whatever…call yourself santa claus if you want…who cares about the name…we’re here to talk about prob the biggest financial decision for most of us…forums like this are very helpful in showing us all the alternatives out there, and the pitfalls….

  21. i have a 35 year mortgage from BMO. They were really good to deal with.
    Signed Feb 9th, 2011, 35 year, 5 year fixed @ 3.44, 20% down.

  22. hey jason
    congrats…sounds good…i hope the other bankers in the ivory tower have put down their courvoisiers, told the waiters to hold up on the shrimp cocktails to read your posting..that 3.44 sounds nice but me, still looking to get those bankers to come down on the 10 year…i always was a dreamer…

  23. I think all brokers can be replaced by a social insurance number, tax return, credit rating, online computer aplocation, and a software program to qualify and quantify the information. Everything can be outsourced overseas and cost 1/3 the price. The broker, and brick and mortar method should be a thing of the past. Then we would see some serious cheap while your at it…take the real estate brokers, and investment brokers too. Their all cold callers for the institutions they work for at best. It’s not like a broker can get you a “deal”, it’s all top down guided. If you have the money in the bank, anything can be yours. Just get informed from great sites like this.

  24. If robots can perform brain surgery then yes anything is possible. Just don’t expect expert mortgage systems online anytime soon. There are tens of thousands of data points required to make a sound mortgage recommendation. Rates are the easy part.

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