Bank of Canada lowers overnight rate target to ¼ percent
Michael Hallett • March 27, 2020
The Bank of Canada today lowered its target for the overnight rate by 50 basis points to ¼ percent. The Bank Rate is correspondingly ½ percent and the deposit rate is ¼ percent. This unscheduled rate decision brings the policy rate to its effective lower bound and is intended to provide support to the Canadian financial system and the economy during the COVID-19 pandemic.
The spread of COVID-19 is having serious consequences for Canadians and for the economy, as is the abrupt decline in world oil prices. The pandemic-driven contraction has prompted decisive fiscal policy action in Canada to support individuals and businesses and to minimize any permanent damage to the structure of the economy.
The Bank is playing an important complementary role in this effort. Its interest rate setting cushions the impact of the shocks by easing the cost of borrowing. Its efforts to maintain the functioning of the financial system are helping keep credit available to people and companies. The intent of our decision today is to support the financial system in its central role of providing credit in the economy, and to lay the foundation for the economy’s return to normalcy.
The Bank’s efforts have been primarily focused on ensuring the availability of credit by providing liquidity to help markets continue to function. To promote credit availability, the Bank has expanded its various term repo facilities. To preserve market function, the Bank is conducting Government of Canada bond buybacks and switches, purchases of Canada Mortgage Bonds and banker’s acceptances, and purchases of provincial money market instruments. All these additional measures have been detailed on the Bank’s website and will be extended or augmented as needed.
Today, the Bank is launching two new programs.
First, the Commercial Paper Purchase Program (CPPP) will help to alleviate strains in short-term funding markets and thereby preserve a key source of funding for businesses. Details of the program will be available on the Bank’s web site.
Second, to address strains in the Government of Canada debt market and to enhance the effectiveness of all other actions taken so far, the Bank will begin acquiring Government of Canada securities in the secondary market. Purchases will begin with a minimum of $5 billion per week, across the yield curve. The program will be adjusted as conditions warrant, but will continue until the economic recovery is well underway. The Bank’s balance sheet will expand as a result of these purchases.
The Bank is closely monitoring economic and financial conditions, in coordination with other G7 central banks and fiscal authorities, and will update its outlook in mid-April. As the situation evolves, Governing Council stands ready to take further action as required to support the Canadian economy and financial system and to keep inflation on target.
Information note
The next scheduled date for announcing the overnight rate target is April 15, 2020. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR at the same time.
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The Bank of Canada announced today that it is holding its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. This decision comes against a backdrop of significant global uncertainty — and for Canadian homeowners, buyers, and anyone with a mortgage coming up for renewal, here's what it means.
Why Work With an Independent Mortgage Professional? If you’re in the market for a mortgage, here’s the most important thing to know: Working with an independent mortgage professional can save you money and provide better options than dealing directly with a single bank. If that’s all you read—great! But if you’d like to understand why that statement is true, keep reading. The Best Mortgage Isn’t Just About the Lowest Rate It’s easy to fall for slick marketing that promotes ultra-low mortgage rates. But the lowest rate doesn’t always mean the lowest cost . The best mortgage is the one that costs you the least amount of money over time —not just the one with the flashiest headline rate. Things like: Prepayment penalties Portability Flexibility to refinance Amortization structure Fixed vs. variable terms …can all affect the true cost of your mortgage. An independent mortgage professional looks beyond the rate. They’ll help you find a product that fits your unique financial situation , long-term goals, and lifestyle—so you’re not hit with expensive surprises down the road. Save Time (and Your Sanity) Applying for a mortgage can be complicated. Every lender has different rules, documents, and policies—and trying to navigate them all on your own can be time-consuming and frustrating. When you work with an independent mortgage professional: You fill out one application They shop that application across multiple lenders You get expert advice tailored to your needs This means less paperwork , less stress , and more confidence in your options. Get Unbiased Advice That Puts You First Bank specialists work for the bank. Their job is to sell you that bank’s mortgage products—whether or not it’s the best deal for you. Independent mortgage professionals work for you. They’re provincially licensed, and their job is to help you: Compare multiple lenders Understand the fine print Make informed, long-term financial decisions And the best part? Their services are typically free to you . Mortgage professionals are paid a standardized fee by the lender when a mortgage is placed—so you get expert guidance without any out-of-pocket cost. Access More Mortgage Options When you go to your bank, you’re limited to that bank’s mortgage products. When you go to an independent mortgage professional, you get access to: Major banks Credit unions Monoline lenders (who only offer mortgages) Alternative and private lenders (if needed) That’s far more choice , and a much better chance of finding a mortgage that truly fits your needs and goals. The Bottom Line If you want to: Save money over the life of your mortgage Save time by avoiding unnecessary back-and-forth Access more lenders and products Get honest, client-first advice …then working with an independent mortgage professional is one of the smartest decisions you can make. Let’s Make a Plan That Works for You If you're ready to talk about mortgage financing—or just want to explore your options—I'm here to help. Let's connect and put together a strategy that makes sense for your goals and your future. Reach out anytime. I’d be happy to help.
