October 2020 Bank of Canada Interest Rate Update

October 28, 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 maintains the overnight lending rate at 0.25%. The retail prime rate will stay at 2.45% (2.60% at TD bank).
  • After some positive bounce back in the summer months the BoC is observing a slowing rate of growth largely due to restrictions and uncertainty around the 2nd wave.
  • The BoC ends their press release with a strong commitment to continue its support of the Canadian economy via ongoing Quantitative Easy ($4B per week) & maintaining the prime rate low. They are projecting that this will need to continue until at least 2023.



If you’re unable to watch the video these are the key points (and you will find a full transcription at the bottom of the page):

  • 0:17 – BOC notes that during the summer we had a strong recovery phase.
  • 0:40 – The BOC notes that there has been a 5.5% decrease in GDP growth.
  • 1:27 – BOC expects a very modest growth rate with recovery not expected until 2023

The Bank of Canada holds overnight rate steady

The Bank of Canada has confirmed no changes to the overnight lending rate this morning. The BoC has communicated clearly with Canadians their commitment to maintaining a low prime rate to help the economy bounce back from the pandemic induced recession.

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

What does today’s decision mean for you?

No recommended changes.

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

5 year fixed rate mortgages have settled down at 1.99% (uninsurable) and 1.74% (insurable). Not sure what the difference between insured and uninsured is? Click here.

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] Today is the Bank of Canada’s interest rate meeting date, and as was widely expected, the Bank of Canada announced no changes. But it’s not so much about what the bank did with the prime rate. It’s more the story and the press release. So let’s dive a little bit deeper to hear about what they had to say.

Chris: [00:00:17] The bank noted that during the summer we had a very strong recovery phase. It was almost like a quick bounce back. But in the most recent press release, they’re starting to observe more moderate growth and that growth isn’t the same right across the economy. It’s very sector-specific, specifically the oil sector and less has been impacted. Lower-income households have been further impacted. So the bank is really highlighting that difference in the economy and really pledging support for lower-income households with further programs that they’re announcing in that press release when it comes to GDP and inflation, two factors that the Bank of Canada looks at for signals about which way the economy is moving.

The bank has noted that there has been a five and a half percent decrease to GDP growth, which is pretty substantial. There’s no doubt about it. We’re in a recession. That’s not news making. They have projected forward that on average in 2021 and 2022, growth to GDP will be approximately 4%.

Modest growth at this time

Chris: [00:01:27] So that’s a very modest growth rate, really not getting back to pre-pandemic levels until 2023. When it comes to inflation, inflation has remained low at about half a percent. The target for the Bank of Canada is 2%. So this is really an indicator that there isn’t a lot of growth in the economy.

Chris: [00:01:46] Finally, the bank pledged support to the economy. They have said that it will take extraordinary support to help the Canadian economy recover. And so they’re actually projecting that up until 2023, it will be necessary to keep the prime rate at the lower bound. So that means that really for the next three years, we shouldn’t expect to see any change to the prime rate. And they’re also continuing with the quantitative easing. So that’s that purchasing of up to four billion dollars of bonds per week to continue to keep liquidity in the economy, to keep interest rates low.

Chris: [00:02:26] So that is the story for the Bank of Canada meeting in October 2020. My name is Christopher Molder. I’m the principal broker of Tridac Mortgage. If you have any questions about this and how the latest news affects you, drop me a line. I’m just a phone call or email away. 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.