BoC Interest Rate
- OCT 23, 2024 UPDATE
The Bank of Canada lowered the key overnight rate by 50 basis points, bringing it down to 3.75%.
This change signals economic problems ahead.
Inflation has dropped to around 2%, but with unemployment rising to 6.5%, businesses are hesitant to hire, and the overall economic outlook remains fragile.
This should make you feel cautious and alert in your financial decisions.
Remember, the BoC has access to a lot more data than any media pundit. So, avoid making rash decisions based on sensational headlines and be mindful.
The BoC doesn’t care about your mortgage payments;
they care about the banking system.
This isn’t the time to jump on any bandwagon. If you do, you could very well get trapped in an expensive venture. It’s crucial to carefully consider the potential risks and rewards of any financial decision, especially in the current economic climate.
Get advised by someone who can help you make the right moves—not just for today, but for tomorrow.
Be careful and get advice custom-tailored to your needs, not the “hot takes” from social media.
- “While I am very pleased to get your perspectives on the impact of our policy decisions, instructions or requests from elected officials about how we should set interest rates could create the impression that the Bank of Canada’s operational independence is at risk. I am sure you agree that this would be unfortunate,” Tiff Macklem wrote in his responses to each of the premiers. Read more…
- James Coyne, the second governor of the Bank of Canada, ran into political interference in 1959 when John Diefenbaker, the prime minister back then, took offence to the message Coyne was giving in speeches that the Canadian economy wasn’t as strong as it appeared on the surface. Read more…
Everyone is talking about locking into fixed-rate mortgage terms without thinking of the penalties associated with it.
This will mean more profit for the lender, a longer financing commitment from you, and difficulty breaking that mortgage later and incurring hefty penalties!
BoC Interest rate, What about it ?
By rising the overnight BoC interest rate, it creates an opposite effect of lowering spending, thereby curbing rate of inflation. We as consumers and businesses have all been feeling the price of groceries, gas, housing market including the rents.
In an attempt to clear the confusion around the topic of the BoC interest rate increases especially the media and bank’s narrative of impending doom I have created a quick post for my clients.
What is your prediction
on BoC next rate announcement?
How does BoC interest rate helps Canadian economy?
In the given situation where inflation and commodity prices are super high, Bank of Canada is attempting to raise the target overnight rate.
Higher rates are intended to shift consumer expectations and put a leash on the excess demand.
Recent stats show the unemployment rate is going down. This means people got jobs and increased earnings. This is a good sign but this fact has nothing to do with the overnight Bank of Canada rate.
How does overnight rate increase help the canadian realestate housing market?
In my opinion, it does not do much for the housing market. All it does is create a panic in the market which deter people to buy real estate for now.
However, when the panic phase is over, people will start buying and selling real estate again. The overnight rate change is not designed to change the present housing market crisis.
It does not address the root cause of the housing market i.e. supply.
Mortgage Delivery GuyQuestions to ask yourself:
- How much impact will it have on your monthly mortgage payments?
- How much more of a mortgage you are qualified for?
- Are there any alternative mortgage solutions out there that work for you instead?
Which mortgage rate type is controlled by the BoC Interest rate?
It’s only the Variable rate mortgages. If you are presently holding a fixed rate mortgage product, these BoC interest rate increases will affect you. Scroll down to check out some FAQs.
What can we do for you while BoC interest rates go up?
My intent is to advise you on the best course of action for you and your long-term real estate goals despite the media’s impending doom rhetoric. Follow the simple math.
We can help implement a powerful strategy by working with the payment frequencies and pre-payment privileges. This allows you to mitigate the risk of soaring interest rates and provides much-needed peace of mind while enjoying the flexibility of the variable rate mortgage product.
More than anything else, it is your financial situation that should be the primary focus when deciding your mortgage terms, current interest rate, mortgage balance, and plans.
If you are looking for a new mortgage with any one of the major Canadian banks you have to qualify as per the mortgage stress test guidelines. To discover more about it click the button below.
There is no such thing as one mortgage solution for all. Everyone’s situation is different. A mortgage solution that is focused on you, your needs, your goals, and aspirations will take you farther and gives you superior leveraging.
This is exactly how I work i.e. to find a lender who prefers to work with scenarios like yours in particular.
Connect with us today if you are unsure what to do next, are stuck in an unusual situation, or simply want a pro bono review of your existing mortgage products, financial assets, and liabilities. You will be glad you did.
You can also learn more about variable-rate mortgages here.
Our clients love us, and so will you.
Below are some of the FAQs we’ve recently asked about rising interest rates. Have you asked yourself or someone else any of these lately?
Bank of Canada (BoC) is Canada’s central bank that is located in Ottawa, Canada.
Its primary mandate is to oversee the country’s monetary policy and financial system that brings economic growth especially setting the interest rates and controlling the money supply & promote growth and economic stability.
The Governing Council is the policy-making body of the Bank. It is made up of the Governor, Senior Deputy Governor and the Deputy Governors.
There is no one-word answer to it. Everyone’s scenario is unique. Factors like your current rate, length of time to maturity, and fixed-rate options come into play. It is in your best interest to connect with us so that we can provide input on your situation.
No. A pre-approval/rate hold on a variable rate guarantees the discount to Prime. For example, if your rate hold is for a rate of Prime minus 0.60%, that is what you’re secured. If Prime fluctuates within your pre-approval period, your applicable mortgage interest rate will also fluctuate. Surprise! Knowing that the Prime rate varies from lender to lender is essential.
The Bank of Canada uses its Overnight Rate to stimulate or slow the economy down. Current inflation is incredibly high, so the increase in Prime will slow it down.
The Prime has risen by 0.75% in the past two Bank of Canada announcements. With this rise, the Prime Rate is at 3.20%. To put that into perspective, the Prime Rate in January 2020 was 3.95%. So, we’re still below where it was before the COVID pandemic started. Expect that Prime will continue to increase until inflation returns to the Bank of Canada’s comfort level of around 2%.
Absolutely. Even during more stable times, we recommend getting a pre-approval/rate hold to protect yourself against the risk of rising rates while you’re looking for your next home. Learn how to get the pre-approval for yourself to have peace of mind.
On eight pre-determined dates per calendar year, the Bank of Canada makes announcements about changes to their Overnight Rate. Generally speaking, the Prime Rate moves along with the Overnight Rate due to those announcements.
Below are the dates when Bank of Canada rate announcement dates for the year 2022.
January 25, 2023
March 08, 2023
April 12, 2023
June 07, 2023
July 12, 2023
September 06, 2023
October 25, 2023
December 06, 2023
It’s anticipated that the Bank of Canada will increase its Overnight Rate, which impacts the Prime Rate. Any changes to the Prime rate will affect variable-rate credit products tied to the Prime Rate.
However, the Bank of Canada announcements and changes to Prime does not affect fixed rates as they move independently from variable rates due to movement in the Bond markets.
Do you feel unsure what to do next or want a pro bono review of your existing mortgage products, financial assets, and liabilities?
Reach out, and let’s chat?
Not at all. If your reason of panic about your monthly payments doubling is based on the newspaper articles, i urge you to be at ease.
If the interest rates double your actual monthly payment changes by only 25%.
The bigger question one needs to ask is;
- When will this happen?
- Will there be some interventions by the policy makers to lower the blow to the over all real estate market, if this happens?
No when your mortgage interest rate TRIPLES your mortgage payment does not INCRAESE THREE TIMES.
In reality your monthly mortgage payment increases by 45%.
I urge you to not fall into the media narrative of doom and gloom. Real math is what you should follow not the news!!!
Hint hint…
Yes, Bank of Canada rate (%) (BoC Interest rate) is also known as over night lending rate.
It is also referred to as key interest rate.
This rate of interest is what is used to lend and borrow money overnight amongst Canadian financial institutions.
NO, not at all.
Every bank has their own way of setting their Prime rate of interests (%). There is no set rule for it.
Generally speaking, the mono-lenders tends to have the same prime rate of interest.
Some of the major Canadian banks prefers to keep their prime rate of interest higher than going rate. However they offer higher discounts to make the offering look better to the borrowers.
Check out he example below for 2 different offerings for variable rate mortgages offered by 2 different lenders;
- Prime (4.70%) – 0.40% = 4.30%
- Prime (4.85) – 0.50% = 4.35%
Notice the difference?
Be smarter about your mortgage interest rates.
Still got questions? Speak to your mortgage advisor.
If you dont have one, feel free to connect with one of our mortgage agent/broker for a pro bono consultation.
Be prepared to be shocked with the information
We have the resources, and expertise to guide you out of these murky waters with no fear tactics. Connect with one of our licensed mortgage broker today.