- Recent fluctuations in variable and fixed mortgage rates have left Canadian consumers confused about future mortgage trends. The good news is that February should be less volatile, with RateSupermarket.ca's Mortgage Rate Outlook Panel anticipating both fixed and variable mortgage rates will remain level during the month.
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Bank of Canada Overview Last update: February 7, 2012
Bank of Canada's target for the overnight rate
Change %
What does this mean?
1.00%
No change
Bank of Canada interest rate announcement schedule for 2011
Here is the schedule for the Bank of Canada's interest rate announcement's for 2011. They usually release the Monetary Policy Report 2 days after every other rate announcement which provides more detail on the state of the Canadian economy and helps everyone understand the basis for the previous rate decisions.
Interest Rate Announcement
Monetary Policy Report
Interest Rate Change to Date
6 December 2011
--
No change
25 October 2011
26 October 2011
No change
7 September 2011
--
No change
19 July 2011
20 July 2011
No change
31 May 2011
--
No change
12 April 2011
13 April 2011
No change
1 March 2011
--
No change
18 January 2011
19 January 2011
No change
7 December 2010
--
No change
19 October 2010
21 October 2010
No change
8 September 2010
--
+0.25
20 July 2010
22 Jugly 2010
+0.25
1 June 2010
--
+0.25
20 April 2010
22 April 2010
No change
2 March 2010
--
No change
The Bank of Canada and Variable Mortgage Rates
The Bank of Canada is responsible for changes to variable mortgage rates because they determine the target overnight lending rate. The overnight rate is the interest rate charged when large banks borrow and lend one-day funds amongst themselves. It is also known as the key interest rate, or the key policy rate.
When the Bank of Canada changes the key overnight lending rate this changes the cost of lending/borrowing short-term funds and therefore influences the lender's Prime Rate. Since variable mortgage rates are linked to prime rates, when prime rate goes up, so do variable mortgage rates and monthly payments.
Variable mortgage rates are advertised as Prime plus or minus X percent, for example Prime -0.60 percent, which means that the interest rate you pay is directly related to the Prime Rate, and will fluctuate whenever this changes.
Example
Let's say the current overnight rate is 1.0 percent and the major banks prime rate is 3.00 percent, and at that time the variable mortgage rate is - 0.75 percent (thus 2.25 percent). If the Bank of Canada increases the overnight rate from 1.0 percent to 1.25 percent (an increase of 0.25 percent), the banks will likely follow suit and increase their prime rate by the same 0.25 percent to 3.25 percent. Your variable mortgage rate will thus also change due to this increase in the prime rate, making your new variable mortgage rate 3.25 percent - 0.75 percent = 2.50 percent.
Bank Prime Rates Canada Last update: December 20, 2011
The Bank of Canada's target for the overnight rate, is their key interest rate. This rate influences mortgage lender's Prime Rates which in turn determines variable mortgage rates. We've listed the major bank's Prime Rates below. Click on the 'More Details' button to compare variable mortgage rates.
Company
Prime Rate
Change %
Last Prime Rate Change
Compare Variable Mortgage Rates Against Prime Rates
3.00%
+ 0.25%
8 September 2010
3.00%
+ 0.25%
8 September 2010
3.00%
+ 0.25%
8 September 2010
3.00%
+ 0.25%
8 September 2010
3.00%
+ 0.25%
8 September 2010
3.00%
+ 0.25%
8 September 2010
3.00%
+ 0.25%
8 September 2010
Bank of Canada details
Bank of Canada history
The Bank of Canada is the country's central bank, was founded in 1934 and is based in the nation's capital, Ottawa, Ontario. It doesn't offer standard banking services to the public or business but is responsible for Canada's monetary policy, bank notes, financial system, funds management. Their main role is "to promote the economic and financial welfare of Canada."
The Bank of Canada's main areas of responsibility are specifically:
- Monetary Policy
- Currency
- Financial System
- Funds Management
- Corporate Administration
Of these areas, monetary policy is the most prominent and the one where many Canadians will mostly see the Bank of Canada in the headlines.
Monetary policy?
The Bank of Canada's monetary policy looks after how much money is in the Canadian economy and what the money is worth. The Central Bank's main influence over monetary policy is the inflationary control system where they'd like to keep the average price of a staple of normal good and services between 1% - 3% annually, or ideally at 2%.
The Bank tries to manage inflation through its control on short term interest rates, and does this by increasing and lowering the target for the overnight rate, which is its key interest rate. This is the rate that is often quoted when the Bank of Canada makes a rate announcement. The overnight rate is the interest rate that the big banks, credit unions and other financial companies can borrow and lend funds to each other. With it's current level of 0.50% (as of June 3, 2010) - that would be a great rate to get a loan!
The Bank of Canada can change the overnight rate at its rate announcement which it holds 8 times throughout the year, and this system came into place in 2000. Previously the rate announcements were held on an ad hoc basis.
Importance of the target for the overnight rate
The reason that businesses and the media pay so much attention to the overnight rate is that it influences many other interest rates that affect people's and businesses daily lives. If the overnight rate rises, banks will typically increase their prime rates by the same amount, which makes variable rate mortgages, personal loans, business loans and lines of credit more expensive.
Other Related Articles
- Experts will tell you your debt-to-income ratio is one of the best ways to gauge your financial position. The media often quotes the Bank of Canada saying Canadians are at dangerously high levels of debt at 153 per cent. But what does that mean? I've spent dinner parties arguing how to properly calculate debt to income ratios and how much is too much. There are many schools of thought on how to asses your financial health. Here are a few.
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- This past Tuesday the Bank of Canada had their first meeting of 2012 to discuss any changes they were going to make to the overnight lending rate. Low and behold ... no change. This came as no big surprise to Canadians and the overnight rate remains steady at 1%. FYI the next meeting is scheduled for March 8th, 2012. How does this impact the mortgage industry exactly?
READ MORE >>
You can view the 2009 Bank of Canada rate announcements.
You can also view the Bank of Canada historic interest rate changes.