December 2020 Bank of Canada Interest Rate Update

December 11, 2020

The Bank of Canada keeps the overnight interest rate unchanged at 0.25%. The retail prime rate will stay at 2.45% (2.60% at TD bank). For the latest rates, check out our rates page here.

Key points from the Bank of Canada October announcement today:

  • The Bank of Canada maintained the overnight lending rate at 0.25%, which means no change to the retail prime rate of 2.45% (2.60% TD).
  • Economic recovery proceeding as anticipated. A sharp rebound in some areas of the economy and slow rebuild in others. 
  • The inflation remains below the 2% target.
  • The BoC restates its commitment to support the Canadian economy recovery via its quantitative easing (QE) program & maintaining the policy rate at its current level.



The Bank of Canada holds the overnight rate steady

There were no surprises. The Bank of Canada’s decision and language largely met expectations.

The economic recovery is rolling out as anticipated by the bank. It’s a story of uneven recovery across the economy. Some sectors are rebounding very strongly, and others are lagging.

You can read the Bank of Canada’s full press release here.

What does today’s decision mean for you?

If you currently have a variable rate mortgage or secured line of credit, you’ll see no change in your monthly payments.

The combination of the $4 billion per week quantitative easing (QE) and low prime rate drives rates to float around their historical lows. We expect this to continue indefinitely for the coming year and beyond.

For more information about mortgage financing and to discuss any specific requests please book a call directly into my calendar here below.


Full Transcription

Chris: [00:00:00] That’s it for the year, the Bank of Canada met this morning for the final time in 2020. It was actually the tenth meeting, the first time we’ve had 10 meetings of the year. Of course, there were two emergency meetings that the bank had during the early days of the pandemic. So what was decided during this morning’s meeting? Well, it was really no surprise. The bank kept the prime rate unchanged and they restated their commitment to support the Canadian economy as we rebound out of the post-pandemic era.

Chris: [00:00:35] So the ways that they’re supporting the Canadian economy are two ways. Number one is the so-called quantitative easing. So what that means is that the bank is purchasing four billion dollars per week of bonds of government debt. And what that does is it creates liquidity and ultimately keeps fixed-rate mortgage rates low. So that’s the significance of quantitative easing.

The prime rate remains low

And then when it comes to the prime rate, they keep their overnight lending rate low currently at quarter percent, which translates into a prime rate of 2.4-5% At retail banks. They noted that there was some uneven recovery across the economy, some areas really rebounding quickly, which was expected and other areas lagging behind. And that’s, of course, still due to the pandemic.

Chris: [00:01:30] So long term things are rolling out as the bank expected, and it’s just really a story of wait and see. And they are reinforcing to Canadians their commitment to us. We’re very fortunate to be in Canada and have that kind of support from the government. Last meeting and last video for 2020. Good riddance, 2020. Looking forward to 2021. I’ll be here again next year. My name is Chris Molder Toronto Mortgage Broker. You can reach out to me any time. The door’s always open. Bye for now.


Christopher Molder

Mortgage Broker

Christopher is a mortgage broker based in Toronto, Canada. And a son of a broker too. He’s a second generation mortgage broker. Following in his father’s steps he joined the family mortgage business straight out of university.