The Bank of Canada holds at 0.50% on December 7, 2016. Bond yields rise even though the policy rate does not.
The decision at a glance
| Policy measure | Announcement |
|---|---|
| Overnight target | 0.50% |
| Change | No change |
| Bank Rate | 0.75% |
| Deposit rate | 0.25% |
Bond yields rise even though the policy rate does not
Global bond yields have risen rapidly following the US election, partly as markets anticipate fiscal expansion in an economy near full capacity. Canadian yields have moved higher too. This is an important distinction for mortgage borrowers: the Bank can leave its overnight target unchanged while longer-term funding costs and fixed mortgage offers change.
Canada's third-quarter rebound is strong, but the Bank expects more moderate growth in the fourth. Consumption benefits from the Canada Child Benefit; business investment and non-energy goods exports remain disappointing. Infrastructure spending is not yet visible in GDP, and substantial spare capacity remains despite employment gains.
Inflation is slightly below expectations, largely because of food prices. The upward effect of earlier currency depreciation is fading while economic slack persists. The Bank judges the current policy setting appropriate. For an upcoming renewal, compare the live lender offer and rate-hold expiry rather than use today's policy announcement as a proxy for the fixed rate you can secure.
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 December 2, 2016 reports the November 30 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 | 3.14% |
| 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, December 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. For the preceding decision, see October’s rate decision.
Expect Moore for Your Real Estate.
— Chad Moore, REALTOR®
— Lake City Realty Ltd., Brokerage