The Bank of Canada holds at 0.50% on October 21, 2015. A rebound is underway, but resource weakness lasts longer.
The decision at a glance
| Policy measure | Announcement |
|---|---|
| Overnight target | 0.50% |
| Change | No change |
| Bank Rate | 0.75% |
| Deposit rate | 0.25% |
A rebound is underway, but resource weakness lasts longer
Canada's economy has rebounded as the Bank expected in July. Non-resource activity is showing clearer strength, helped by previous rate cuts and the weaker dollar. Household spending continues to support growth. The hold acknowledges that improvement without treating it as a complete recovery.
Lower oil and other commodity prices are still reducing export income and resource investment. The Bank trims its growth outlook for 2016 and 2017, projecting just over 1% growth this year, about 2% next year and 2.5% in 2017. Weaker investment also changes its assessment of how quickly the economy can expand without inflation.
Underlying inflation remains around 1.5% to 1.7%; core inflation near 2% partly reflects temporary currency effects. The Bank expects full capacity around mid-2017 and considers inflation risks roughly balanced. Household financial vulnerabilities are nevertheless rising. For a homeowner renewing or taking on a larger property, today's supportive rate is a reason to compare financing carefully, not to dispense with a repair reserve or payment cushion.
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 October 16, 2015 reports the October 14 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 | 2.70% |
| 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, October 21, 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 September’s rate decision.
Expect Moore for Your Real Estate.
— Chad Moore, REALTOR®
— Lake City Realty Ltd., Brokerage