The Bank of Canada today announced it will be holding the key overnight rate at 0.25 percent. The Bank of Canada interest rate has remained at this level since March 2020, when it announced an emergency rate cut in response to the COVID-19 pandemic. As part of its statement, the Bank also said it would be continuing its Quantitative Easing program, buying at least $5 billion in Government Of Canada bonds each week.
The Bank did acknowledge that the Canadian economy has rebounded faster than expected throughout Q3 and that the United States economy has entered a stronger recouperation stage than was expected. However, the Bank says the continued recovery of the economy will “require extraordinary monetary policy support”. As such, the Bank says it will likely hold rates at this level, the effective lower bound, until “the 2 percent inflation target is sustainably achieved”, at which we could conceivably expect a Bank of Canada interest rate hike.
James Laird, the co-founder of Ratehub.ca and President of CanWise Financial mortgage brokerage, says the Bank has been very clear on its intention.
“The Bank of Canada once again reiterated that they are not going to go any lower,” he says.
“The Bank seems cautiously pleased with the beginning of the economic recovery that is underway. They noted the housing activity rebound that occurred over the summer and attributed it to pent up demand from the spring market. They continue to be committed to supporting the economic recovery by maintaining the overnight rate at its current record low.”
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What does this mean for borrowers?
James Laird says mortgage rates will likely be stable for some time.
“Canadians should expect the Bank to maintain its current stance for the foreseeable future which means that fixed rates will remain at their current record low. It also means that variable rate holders should not expect prime rates to change anytime soon,” he says.
“Anyone looking to purchase in the fall should get a pre-approval so that they understand how much they can qualify for and it guarantees the current market rates for up to four months.
“The real estate market rebound has caused mortgage lenders to compete by continuously lowering both fixed and variable rates to new historic lows.”
The next scheduled date for announcing the overnight rate target is October 28, 2020.