The Bank of Canada holds at 0.25% on January 26, 2022. The low-rate commitment ends, even though the rate holds.
The decision at a glance
| Policy measure | Announcement |
|---|---|
| Overnight target | 0.25% |
| Change | No change |
| Bank Rate | 0.50% |
| Deposit rate | 0.25% |
The low-rate commitment ends, even though the rate holds
The important change today is the removal of the Bank’s exceptional promise to keep the policy rate at its lower bound. It now judges that the economy’s overall unused capacity has been absorbed. Employment is strong, vacancies are elevated and wage gains are picking up. Housing activity continues to put upward pressure on prices.
Omicron is expected to interrupt the first quarter, but the Bank anticipates a subsequent rebound led by services spending, exports and investment. It forecasts Canadian growth of 4% in 2022 and about 3.5% in 2023. That outlook is strong enough for the Bank to say rates will need to increase, with the timing and pace determined by inflation and economic conditions.
Inflation is expected to remain near 5% in the first half of this year as supply constraints and higher food and energy costs spread across more goods. The Bank forecasts a decline toward 3% by year-end, but is concerned that near-term inflation expectations are rising. For borrowers, an unchanged rate today should not obscure the message: the conditions supporting emergency-low rates have changed.
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.
Posted-rate context: The Bank of Canada weekly observation for January 19, 2022 gives the rates below. They are typical posted rates at six major chartered banks, not discounted offers or a quote for your mortgage. The observation comes before today’s policy decision; ask a lender for its current rates before deciding. Source: Bank of Canada weekly posted-rate series.
| Posted reference | Rate |
|---|---|
| Prime | 2.45% |
| One-year conventional mortgage | 2.79% |
| Three-year conventional mortgage | 3.49% |
| Five-year conventional mortgage | 4.79% |
Payment illustration: a $300,000 mortgage amortized over 25 years at the 4.79% posted five-year rate is approximately $1,709 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, January 26, 2022. The national policy decision does not, by itself, establish a change in Greater Sudbury property values.
For context, compare the December 8, 2021 hold at 0.25% with today’s decision.
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