The Bank of Canada holds at 0.75% on May 27, 2015. The inflation headline hides two opposing forces.
The decision at a glance
| Policy measure | Announcement |
|---|---|
| Overnight target | 0.75% |
| Change | No change |
| Bank Rate | 1.00% |
| Deposit rate | 0.50% |
The inflation headline hides two opposing forces
Core inflation is above 2%, but the Bank estimates the underlying trend at only 1.6% to 1.8%. Import-price effects from the weaker Canadian dollar and some industry-specific increases are lifting the core measure, while economic slack restrains demand. That is why the Bank does not treat the higher core reading as a reason to raise rates.
The Bank's April outlook remains broadly intact. Canadian consumption is holding up despite the loss of income from cheaper oil, and it expects a stronger second quarter in the United States to help Canadian exports and business investment. The handover from resource-led growth is still uneven.
Bond yields have recently risen, and the Canadian dollar has strengthened alongside oil prices and a softer US dollar. Those movements matter even with an unchanged policy rate: fixed mortgage offers can change as funding markets move. The Bank is waiting to see whether these developments persist before changing its assessment. A borrower comparing offers should check the current written quote, not assume a policy hold freezes mortgage pricing.
What this means for a mortgage
The overnight target influences short-term borrowing costs, including lender prime rates. Variable mortgages and home-equity lines of credit are more directly exposed to prime-rate changes. Fixed mortgage offers also depend on bond yields, funding costs, the term and lender competition; they can move even when the Bank holds.
The Bank of Canada’s Weekly Financial Statistics bulletin of May 22, 2015 reports the May 20 posted reference rates below. These are typical posted rates at six major chartered banks, not discounted offers or an assurance of the rate a borrower can obtain. They should not be read as proof that a lender has already passed through today’s decision.
| Posted reference | Rate |
|---|---|
| Prime | 2.85% |
| One-year conventional mortgage | 2.89% |
| Five-year conventional mortgage | 4.64% |
Payment illustration: a $300,000 mortgage amortized over 25 years at the 4.64% posted five-year rate is approximately $1,684 per month for principal and interest, using Canadian semi-annual compounding. This is an illustration, not a lender quote. Taxes, insurance, utilities, closing costs and qualification requirements are separate.
Put the announcement into a Greater Sudbury plan
Buying or renewing
If you’re buying or renewing in Greater Sudbury, I’d ask for written figures using your balance, down payment and amortization. Compare payment mechanics, prepayment options, penalties and the cash left after closing. A variable mortgage with fixed payments may change how much principal you repay instead of changing the payment immediately; the contract determines the result.
Preparing to sell
Financing affects what buyers can carry, but it does not set one price for every home. Compare recent sales and active alternatives in the same neighbourhood and price range. Condition, carrying costs, presentation and offer terms remain central to the decision.
Official announcement: Bank of Canada, May 27, 2015. The national policy decision does not, by itself, establish a change in Greater Sudbury property values.
For a local plan, explore the Buyer Experience or Seller Experience. For the preceding decision, see April’s rate hold.
Expect Moore for Your Real Estate.
— Chad Moore, REALTOR®
— Lake City Realty Ltd., Brokerage