The Bank of Canada is holding at 0.50% today, September 7. Exports are disappointing beyond the temporary wildfire disruption, and the Bank sees somewhat more downside risk to inflation. For a Greater Sudbury buyer or owner, I would still work from a written lender offer and a payment you can carry, not assume today’s hold changes your rate.
The decision at a glance
| Policy measure | Announcement |
|---|---|
| Overnight target | 0.50% |
| Change | No change |
| Bank Rate | 0.75% |
| Deposit rate | 0.25% |
Disappointing exports tilt inflation risk downward
The second-quarter contraction is not just a wildfire story. Exports fell more broadly than expected, even after allowing for weaker US investment, resource-sector adjustment and auto-production cutbacks. July's export improvement is encouraging, but the earlier losses raise the possibility of a lower growth path than the Bank forecast in July.
A second-half rebound is still expected. Restored oil production, rebuilding in Alberta, Canada Child Benefit payments and federal infrastructure spending should support activity. The question is how much of that improvement becomes sustained private-sector investment and export demand rather than a temporary recovery from disruption.
Headline inflation is below 2%, with cheaper energy an important factor. Inflation risks have moved somewhat downward, but household borrowing vulnerabilities continue to rise. The Bank holds because the combined risks remain compatible with the current rate. There is no new policy reduction for a buyer to apply to a mortgage today. I would ask the lender for current fixed and variable figures anyway, because those offers can move independently of the overnight target. July’s decision gives the earlier rebound forecast that the Bank is now reassessing.
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’s most recently available weekly bulletin before today’s decision reports these posted reference rates as at August 31, 2016. They are typical posted rates at six major chartered banks, not discounted offers or an assurance of the rate you could obtain. Today’s policy hold does not itself change a lender’s offer.
| Posted reference | Rate |
|---|---|
| Prime | 2.70% |
| One-year conventional mortgage | 3.14% |
| Five-year conventional mortgage | 4.74% |
Payment illustration: a $300,000 mortgage amortized over 25 years at the 4.74% posted five-year rate is approximately $1,701 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
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, September 7, 2016. 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.
Expect Moore for Your Real Estate.
— Chad Moore, REALTOR®
— Lake City Realty Ltd., Brokerage