Bank of Canada decides NOT to increase rates today!
Bank of Canada has maintained the overnight rate of 0.25%.
We have not seen a change in this rate since March 2020
The Bank of Canada Overnight Rate has a direct impact on Prime, which affects those with a Variable Rate Mortgage or Home Equity Line of Credit.
Fixed Rates are based on the Canada Bond Yield. We have already seen a steady increase to fixed rates over the last several months.
What is the Bank of Canada Overnight Rate?
The overnight rate is generally the interest rate that large banks use to borrow and lend from one another in the overnight market.
The Bank of Canada holds this Key Lending rate. They might lower it to encourage borrowing and spending OR they may increase it to curb inflation and debt levels.
Major lenders typically raise or decrease their prime rate when there is a change to this overnight lending rate. Thats the number they use to set interest rates for loans and mortgages.
Unlike a fixed rate where one is locked in to their rate, those in a variable rate will be affected by these changes. Home owners with fixed rate mortgages won't be affected until they have to renew.
More Increases to come?
The Bank of Canada held its 1st meeting of the year on January 26th, 2022. Highlights from the meeting include:
The Target Overnight Rate will remain at 0.25%. (Unchanged from the prior meeting)
CPI inflation is expected to remain close to 5% for the first half of the year, a 30-year high not seen since 1990, and well above the Bank of Canada’s 2% target
The Bank of Canada says that "interest rates will need to increase", setting the stage for a possible rate hike in March 2022
The Bank of Canada decided to keep its policy rate unchanged at 0.25% amid worries about Omicron's near-term impact on the economy. It was widely expected that the Bank of Canada would increase rates to rein in rising inflation. While the Bank of Canada's policy interest rate will remain unchanged for now, they are signalling that rates will rise in the future. The next interest rate announcement will be on March 2, 2022.
A look back at the changes in overnight rate
May 31 2010
July 19 2010
Sept 7 2010
Jan 20 2015
July 14 2015
July 11 2017
Sept 5 2017
Jan 16 2018
July 10 2018
Oct 23 2018
Mar 3 2020
Mar 15 2020
Mar 26 2020