September 2020 Bank of Canada Interest Rate Update

September 9, 2020
bank of canada september

The Bank of Canada keeps 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 September 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).
  • Economic activity and household spending were stronger than expected in July. The Canadian economy is showing strong signs of bouncing back.
  • The Bank of Canada sees the recuperation phase to be ‘slow and choppy’ as the economy copes with ongoing uncertainty and structural challenges.

 

 

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):

  • 0:20 – BOC to continue quantitative easing with a 5-billion dollar per week bond buyback program.
  • 0:35 – The Canadian economy appears to be recovering better than expected. However, this appears to be due to programs created to support small businesses. Household spending was also better than expected.
  • 1:26 – BOC expects a slow and long recovery with no end in sight currently.

The Bank of Canada holds overnight rate steady

No surprises this morning as the Bank of Canada confirmed no changes to the overnight lending rate. During their press release, the BoC shared some positive outlook as the economy is rebounding nicely. However, there is still a lot of caution and concern.

Uncertainty remains around the impact of spikes in Covid-19 and a slow and choppy recovery in the coming months.

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

What does today’s decision mean for you?

Get used to these “no change” meetings.

If you currently have a variable rate mortgage hold steady. Ride out this extended period and enjoy the low rate environment.

Fixed-rate mortgages have also been trending in a downward direction ranging between 1.84% (high ratio) to 2.04% (uninsurable).

The case for refinancing.

We are now at the lower limit of interest rates. We don’t expect them to go lower so now is a great opportunity to refinance to a lower rate.

But there is a problem…mortgage breakage penalties are ASTRONOMICAL!

Even though it costs a small fortune to break your mortgage it can be worth it. If you are carrying any consumer debts or want to pull equity out of your home for renovations or investments now is the time.

Let’s review your numbers…

Step 1 – Call your lender and get a quote for the penalty and exact outstanding mortgage balance.

Step 2 – Set up a call with me via my calendar below!

 

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


 

Full Transcription

[00:00:03] September is definitely upon us. The nights are getting cold. The days are cooler. Kids are back to school and the Bank of Canada just had their September interest rate decision meeting. No surprise this morning, the bank left the prime rate unchanged. They also reaffirmed that they were going to continue with the quantitative easing, five billion dollars a week bond buyback program. That’s a mouthful!

[00:00:30] So what did the Bank of Canada say during today’s press release? It was interesting to note that the Canadian economy was recovering better than expected, which is really fantastic to see. However, the bank did mention that they see that largely due to some of the programs that they’ve introduced to support businesses. Household spending was also better than expected. And that’s something that the bank will keep an eye on with great interest. But it’s a great sign to see that Canadians are feeling positive and optimistic about the future.

Positive news from the Bank of Canada

[00:01:02] So that’s all very positive from the Bank of Canada. However, it comes with a caveat, a little asterisk because the banks, the bank does suggest that the future recovery of the economy will be slow and choppy. Of course, one of the biggest factors is how COVID will affect us going forward if there will be a second wave. But even still, they’re seeing it as being a very slow, long recovery with no end in sight at the moment.

So all that being said, the bank affirmed again that they’re going to keep interest rates low to help with that recovery, and that includes the lowering and the maintaining of the prime rate at its current level and also the buyback program of those government bonds. And the significance of that buyback program is it keeps liquidity in the system, which will maintain fixed-rate mortgages low as well.

Profile

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.

Customer Service Numbers:

CMHC: 1-800-668-2642
Genworth: 1-800-511-8888
Canada Guaranty: 1-866-414-9109

ATB: 1-800-332-8383
B2B: 1-800-263-8349
BMO: 1-877-895-3278
Bridgewater: 1-866-243-4301
CIBC: 1-800-465-2422
CMLS: 1-888-995-2657
Optimum: 1-866-441-3775
Equitable: 1-888-334-3313
Connect First: 403-736-4000
Chinook Financial: 403-934-3358
First Calgary Financial: 403-736-4000
First National: 1-888-488-0794
Haventree: 1-855-272-0051
Home Trust: 1-855-270-3630
HSBC: 1-888-310-4722
ICICI: 1-888-424-2422
Manulife: 1-877-765-2265
MCAP: 1-800-265-2624
Merix: 1-877-637-4911
Marathon: 1-855-503-6060
RBC: 1-866-809-5800
RFA: 1-877-416-7873
RMG: 1-866-809-5800
Scotiabank: 1-800-472-6842
Servus: 1-877-378-8728
Street Capital: 1-866-683-8090
TD: 1-866-222-3456