The Bank of Canada continued their predictable and rather boring trend of uneventful rate announcements this morning, confirming that there will be no change to their overnight rate. Even though predictable, it’s good news to find the rate unchanged given that the next move from the BOC will be upward. The overnight rate is important to those with variable rate mortgages and HELOCs (Home Equity Lines of Credit), as it’s what mortgage lenders use to set their prime rate.  When it remains unchanged, so do the rates on these products.

The Bank of Canada rate announcements do not have a direct effect on fixed mortgage rates, which are heavily influenced by bond yields. They can have an indirect effect on them however. If they were to make an unexpected move, then this could push bond yield movement in one direction or the other, potentially resulting in changes to fixed mortgage rates. This happened back in mid-march of 2020 when the BOC made a rare ‘surprise’ rate cut of 0.50%, which then sent bond yields soaring.  This resulted in some lenders increasing their fixed mortgage rates by as much as 0.25% within just a few hours, and virtually all of them reacting with increases over the next few days. We saw a radical movement in prime rate in one direction, with a radical movement to fixed rates in the other. While this kind of radical movement is possible, it’s quite rare.

When Can A Change To Prime Rate Be Expected?
In this morning’s announcement, The Bank of Canada once again stated that they are not expecting to increase their overnight rate until sometime in the second half of 2022. There is still much uncertainty surrounding the future of the pandemic which may cause them to change their prediction however. While the BOC expects the economy to continue to strengthen for the remainder of the year, they have concerns about the fourth wave of COVID, rising cases in some areas, as well various supply issues.

This basically means anything can happen.

While they are holding to their prediction of a rate increase in the second half of 2022, it’s quite possible that they could revert back to their original prediction of 2023. Time will tell of course.  Until then, the prime rate will remain unchanged.

Mortgage Rates Remain Stable
If there is anything positive to come out of the pandemic, it’s record low mortgage rates.

Variable rates can be found as low as 0.99% (prime -1.46%) for an insured 3 year term. 5 year variable rates range from 1.05% – 1.30%  (prime -1.40% to prime -1.15%) depending on your situation. Fixed mortgage rates remain stable with rates as low as 1.69% 5 year fixed for an insured mortgage.

While there may be some fluctuation in either direction moving forward, I would not expect any radical changes as we move into the fall.

You can read about the official announcement here. The next scheduled Bank of Canada rate announcement will be on October 27th, 2021. Â