Overnight Rate Held Steady

Bank-of-Canada-Benchmark-RateThe 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):

  • Bank-of-Canada“…Some modest withdrawal of the present considerable monetary policy stimulus may become appropriate…” (This phrase debuted in the BoC’s April report. The market was eager to see if it would remain, and it did. Carney wants debt-laden consumers to know he’s ready to lift rates as soon as conditions warrant.)
  • “The outlook for global economic growth has weakened in recent weeks.”
  • “Some of the risks around the European crisis are materializing and risks remain skewed to the downside. This is leading to a sharp deterioration in global financial conditions.” (Canadian interest rate policy is largely held captive by this factor. The BoC must watch—like the rest of us—to see how EU events unfold.)
  • “…(Canadian) housing activity has been stronger than expected, and households continue to add to their debt burden in an environment of modest income growth.” (Near-record-low rates continue to drive this activity.)
  • “…Domestic financial conditions remain very stimulative.” (In other words, things would have to get a lot worse to justify a rate cut.)

For mortgagors, the above suggests that prime rate will stay put at 3.00% for the foreseeable future. That should keep us in the longest period of flat rates since the 1950s.

The benchmark 5-year bond was unchanged following today’s announcement.

The next BoC rate meeting is six weeks away on July 17.


Rob McLister, CMT

  1. Today’s B of C announcement in holding the rate steady will probably not result in overall mortgage rates to falling further. Bond yields are at a point where banks could lower mortgage rates which could possibly start another rate war as was seen in the early spring. The federal government has been recently putting pressure on the banks to avoid this. In all probability the banks will hold their mortgage rates steady for the next while

  2. No surprise there, it was always premature for the BOC to indicate that a rate hike was coming. The economy was and still is very fragile and for all of us with variable rates this is a very good thing. The European crises is far from being over, it will probably get worse before we start seeing some improvements. The BOC has dug themselves in a hole and the only way to at least try to make any future mortgage holders to not take on more debt that they can afford is by creating a scare tactic that rates will go up in the short term.

  3. I am re-upping on a new 5 year fixed. I have been offered 3.22%. Should I expect a better rate? Are the 2.99% days over?

  4. Yes you can do (much) better! As for the 2.99% days, we will have to wait and see, but given the current state of the Can 5yr bond, I don’t see how they can hold off a rate cut much longer. (Thanks Jim!)
    As Rob has previously indicated though, the tactic now seems to be a lower discretion rate for brokers and advisors, but advertised rates holding steady. What does this mean? I think you need a better broker :-)
    Hope that helps!

  5. 3.22% is great if you have more than 20% equity and your mortgage has a 120 day rate hold. Otherwise, not so great.

  6. On a 60 day hold you can do much better than 3.22%. No one can predict about the 2.99% days. The banks could start another rate war but why decrease your profits?

  7. We currently have a variable rate arm mortgage at 2.5%, and paying as if it were 3.75, to kill as much principle as possible, our broker has pointed out that 10 yr for 3.84 fixed, but we might be moving in about 3-5 years ,we are going into or 2ND year with or current mortgage, what we do!

  8. 2.99 for 4 years if you’re insured. Don’t re-upp, call your mortgage broker to switch out. Gotta keep the lenders honest on their renewals.

  9. With 20% or more down, you should be able to get 3.09% for a five-year fixed (at least two of the Big Five are offering this).

  10. Hi. How do you know that exactly? No bank website shows rates that low.
    What do you have to do to get that rate?

  11. You can usually port a mortgage if you move. You can also break a 10 year mortgage after five years and only pay 3 month’s interest. The question is, how big of a rate increase can you afford?

  12. Hey ec,
    Tough to get cookie cutter advice on rates as they are truly so many factors to consider. Some of the questions to think over before making any rate decision:
    – When you move would you sell your place or keep it as a rental?
    – Does your current variable payment float or stay fixed for the term?
    – How close do you watch rates and how uncomfortable does it make you to hear about them go up? or equally go down?
    – How much disposable income do you put into a savings plan(RRSP’s/Investments) other than your focus on a debt reduction plan?
    – What is your fall back position(how much do you have saved in liquid savings)?
    With thoses questions answered along with the current rate you have and the offer on the table you and your broker will have a better idea about the right fit for your mortgage!
    And if those arent questions they are concerned about than get one that does!

  13. Hey Becky21,
    Most people have 2 options:
    1)As (Island Broker) mentioned – get a better broker… Trust is a huge part of these decisions and if your seeking advice than it shows that the relationship is probably not as strong as you need and deserve, and you could do better!
    2) Sit down with your bank rep and bring in a peice of paper with 4 questions on it…
    -How much do I have to keep in my chequing account at this bank to get a free “large” safety deposit box?
    -What is the maximum amount of money they can cover with CDIC insurance?
    -Do they offer any credit cards with premier points programs?
    -What is the best 5yr fixed rate they can offer on your mortgage?
    … The first 3 questions are just a lurefor them to go below their coached rates and get to the floor rates. If they call you out and ask the background of your questions… you are expecting a potential inheritance that the amount is undetermined and even though feel the peace of mind of a fixed rate mortgage fits you best!
    That should do the trick to get you the best rate from the bank or simply just get a broker to shop/fight/negotiate for you!

  14. We live in a open economy and the BofC and Fed Govt. does not regulate mortgage rates. I would have thought any mortgage broker would know that. Simply put, all F.I.’s will continue to offer whatever rate they choose to bring to the market.
    However, I do sense if they offer a record low fixed rate again, they might be a little quieter about it!

  15. Please…this is not a discussion board for rate wars and giving advice with too little information to do so, or to advertise your business and solicit clients.

  16. Hey Anonymous,
    I have read over the full list of posts on this article and dont see a single solicitation for clients nor a single advertisement so I think you may have your wires crossed when reading peoples responses…
    I am not sure specifically your background or reasons for using a site like this? and the beauty is regardless it is both appreciated and welcomed and that is the way it should be.
    I mean in no way to be confrontational… But this site is very dynamic and has many angles that it represents and that is the beautiful part of a this community!
    This is a very competitive industry and banter about rate negotitions just eduacates consumers and keeps brokers/bankers honest to truly do the best for their clients each and everytime… Pay checks aren’t free anymore!
    PS- other posters I personally love hearing about rate specials and deals you come accross as your experience is really important to those of us who sell the products!
    Thanks

  17. Hi everyone,
    I have heard about 10 years fixed offered at 3.89/3.95%.
    Can anyone please tell me which Bank is offering anything like this?
    Thanks in advance

  18. Call a broker, as there are a couple of national lenders that offer such terms with a buydown.
    Opps, was I soliciting a client? Haha!

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