Interest rates hit record lows. 5-year yield in Canada plunges to 0.82%.
Michael Hallett • March 4, 2020
The Bank of Canada Brings Out The Big Guns
Following yesterday's surprise emergency 50 basis point (bp) rate cut by the Fed, the Bank of Canada followed suit today and signalled it is poised to do more if necessary. The BoC lowered its target for the overnight rate by 50 bps to 1.25%, suggesting that "the COVID-19 virus is a material negative shock to the Canadian and global outlooks." This is the first time the Bank has eased monetary policy in four years.
According to the BoC's press release, "COVID-19 represents a significant health threat to people in a growing number of countries. In consequence, business activity in some regions has fallen sharply, and supply chains have been disrupted. This has pulled down commodity prices, and the Canadian dollar has depreciated. Global markets are reacting to the spread of the virus by repricing risk across a broad set of assets, making financial conditions less accommodative. It is likely that as the virus spreads, business and consumer confidence will deteriorate, further depressing activity." The press release went on to promise that "as the situation evolves, the Governing Council stands ready to adjust monetary policy further if required to support economic growth and keep inflation on target."
Moving the full 50 basis points is a powerful message from the Bank of Canada. Particularly given that Governor Poloz has long been bucking the tide of monetary easing by more than 30 central banks around the world, concerned about adding fuel to a red hot housing market, especially in Toronto. Other central banks will no doubt follow, although already-negative interest rates hamper the euro-area and Japan.
Canadian interest rates, which have been falling rapidly since mid-February, nosedived in response to the Bank's announcement. The 5-yield Government of Canada bond yield plunged to a mere 0.82% (see chart below), about half its level at the start of the year.
Fixed-rate mortgage rates have fallen as well, although not as much as government bond yields. The prime rate, which has been stuck at 3.95% since October 2018 when the Bank of Canada last changed (hiked) its overnight rate, is going to fall, but not by the full 50 bps as the cost of funds for banks has risen with the surge in credit spreads. A cut in the prime rate will lower variable-rate mortgage rates.
Many expect the Fed to cut rates again when it meets later this month at its regularly scheduled policy meeting, and the Canadian central bank is now expected to cut interest rates again in April. Of course, monetary easing does not address supply-chain disruptions or travel cancellations. Easing is meant to flood the system with liquidity and improve consumer and business confidence--just as happened in response to the financial crisis. Expect fiscal stimulus as well in the upcoming federal budget.
All of this will boost housing demand even though reduced travel from China might crimp sales in Vancouver. A potential recession is not good for housing, but lower interest rates certainly fuel what was already a hot spring sales market.
Data released today by the Toronto Real Estate Board show that Toronto home prices soared in February, and sales jumped despite low inventories. The number of transactions jumped 46% from February 2019, which was a 10-year sales low as the market struggled with tougher mortgage rules and higher interest rates. February sales were up by about 15% compared to January.
This article was written by DLC's chief economist Dr Sherry Cooper and was originally published on her client newsletter.
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Playing in the forest today. Always fun exploring. #mountainbikingmortgagebroker
Mortgage Brokering meets mountain biking and craft beer. A couple months ago I set for a bike ride with the intention of answering few mortgage related questions, mission accomplished. Any good bike ride pairs nicely with a tasty beer which we enjoyed @parksidebrewery. Hope you see the passion I have for brokering, biking and beer. @torcabikes #mountainbikingmortgagebroker
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Spotted a ski-bunny today @kirstinjhallett so I trapped ‘er. 📸 credit @troy.hartley
Aidan leading the pack up the Lemming Line in seek of fine fresh powder.
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Happy Holidays. Seasons Greetings. Merry Christmas. All the best from Kirstin, Aidan and Michael. Enjoy your family time.
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TEASER alert...at thats what I think they call it in the business. Years ago a wrote a blog called BEERS BIKES AND MORTGAGES. I some how (in my head) blended all 3 topics into 1 blog. Simply put, I enjoy aspects of all 3 with each of them providing something different. I re-united with the talented Regan Payne on a project that I think will shed a bit more light on who I am and what I do. #craftbeer #mountainbike #mortgagebrokerbc #dlccanadainc
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The Lookout over looking Tulameen BC. Took some 4x4ing to get there, but we did it.
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This would have been a fun stunt once upon a time!
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The snow report suggested 8 cm had fallen, it was more like 25-30 cm.
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Exploring Pinecone Burke Provincial Park a month ago with @troy.hartley. Standing in the site of the old ski lodge.
A well weathered tree coming through yet another winter with Yak Peak 2,039 metres in the background. Putting my limited artist talent to the test, these iPhones and filters making anybody a photographer.
A successful reconnaissance mission we crossed Falls Lake, ski toured up towards Zopkios Peak 1921 m. It was a exceptional picnic destination. The skiing was shit!
Who’s is going to go first?...I’ll go if you don’t! No friends on a powder day! @j_penner70 📷 @sheascottcolpitts
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In the green room today on the best coast amidst winter...not a bad place. 📷 @dgm_images
I saw this hat on Instagram, that very moment I knew I needed it. As a BC boy born and bred The Outdoorsman hat needed to be added to my collection. As someone who loves BC and most things outdoor, I’m now glad I have a cool hat to wear and fly the flag of BEAUTIFUL BRITISH COLUMBIA. It will be in my bag for all post-exploration celebratory cold pints. If you want to check them out or add one to your collection go to @nineoclockgun ...and yes my facial hair matches the hat as well.
When two of your ski buddies are 13 years old, you know you’re raising rippers. @paigerriley
My ski buddy getting untracked turns. It was knee to thigh deep all day for him, only shin to knee for me.
We went for a snowshoe this afternoon, but we probably should have considered taking our flippers instead. Our timing was off by one day.
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Ancient blue glacier ice craving out deep valleys. It’s pretty cool standing underneath one...photo credit @dustanwoodhouse
This is a great start to the day!
No better way to share the great outdoors than with friends. @troy.hartley @mike_ilic711 @j_penner70
The ski out back to the truck was more of an adventure than we bargained for...
Exploring the BC backcountry, it did not disappoint...it never really does.
Thank god we are all narcissistic and have the ability to take pictures of ourselves 🤪. This is taken pre-turkey dinner, I’m sure we will all be back in our comfy clothes soon! Merry Christmas!
The crew shredding some turns , it was a 23,000 vertical foot kind of day.
Happy belated Hanukah, Merry Christmas and Happy Holidays to all. Be sure to enjoy the festivities.
Top of Swan Falls. I’ve said it many times before and I will say it again, our license plates say it all. BEAUTIFUL BRITISH COLUMBIA. #gooutside
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Moss, a non-vascular plant and Mother Nature’s carpet reclaiming the forest.
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Just follow the brown line switchbacking through Mother Nature. She’s so damn beautiful!
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A tasty beverage while on the water yesterday from @backcountrybrewr and @backcountrybrewing
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Whistler slick rock is my favourite.
Wood to wood gap in Whistler.
Passing underneath the Ironworkers Memorial Bridge on the return journey of dinner-by-boat. No filter.
And now the training starts for Paris 2024 summer olympics.
Archery target: before, during and finished.
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Aidan is captaining the watercraft, mom in just the passenger. Kalamaka Lake.
#Drewmboat camo @parksidebrewery
Safety first when roasting marshmallows.
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Raw kale. Just not the same as a kale caesar salad.
Saratoga Beach fire.
Canadian tuxedo.
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Going vertical. #slickrock
I have a ski buddy, now it’s time to train a biking buddy.
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Aidan and a couple buddies are now members at the Pitt Meadows Golf Club. @greggmcnally @genevemcnally @wendy22boddy @jaradboddy @kirstinjhallett
Raw and unedited. Old school skinny with a drop at the end.
I’m still HOME ALONE! Looking forward to the day when I’m able to have some friends over to share these @backcountrybrewing Widowmaker IPAs. #backcountryphotocontest
Zoa Peak, Coquihalla summit 1,500 vertical metres of skiing.
Distancing myself from the real world!
The dry land version of the @andrei_svechnikov37 lacrosse-style goal executed Aidan.
Skis or bike? Bike. The snow won’t stop me.
Does anybody need or want any firewood? It’s free...you come pick it up.
I needed to buck up the trees they fell in the last wind storm. Task complete.
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The Bank of Canada announced today that it is maintaining its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. For Canadian homeowners, buyers, and anyone with a mortgage on the horizon — here's what you need to know.
Ready to Buy Your First Home? Here’s How to Know for Sure Buying your first home is exciting—but it’s also a major financial decision. So how can you tell if you’re truly ready to take that leap into homeownership? Whether you’re confident or still unsure, these four signs are solid indicators that you’re on the right path: 1. You’ve Got Your Down Payment and Closing Costs in Place To purchase a home in Canada, you’ll need at least 5% of the purchase price as a down payment. In addition, plan for around 1.5% to 2% of the home’s value to cover closing costs like legal fees, insurance, and adjustments. If you’ve managed to save this on your own, that’s a great sign of financial discipline. If you're receiving help from a family member through a gifted down payment , that works too—as long as the paperwork is in order. Either way, having these funds ready shows you’re prepared for the upfront costs of homeownership. 2. Your Credit Profile Tells a Good Story Lenders want to know how you manage debt. Before they approve you for a mortgage, they’ll review your credit history. What they typically like to see: At least two active credit accounts (trade lines) , like a credit card or loan Each with a minimum limit of $2,000 Open and active for at least 2 years Even if your credit isn’t perfect, don’t panic. There may still be options, such as using a co-signer or working on a credit improvement plan with a mortgage expert. 3. Your Income Can Support Homeownership—Comfortably A steady income is essential, but not all income is treated equally. If you’re full-time and past probation , you’re in a strong position. If you’re self-employed, on contract, or rely on variable income like tips or commissions, you’ll generally need a two-year history to qualify. A general rule: housing costs (mortgage, taxes, utilities) should stay under 35% of your gross monthly income . That leaves plenty of room for other living expenses, savings, and—yes—some fun too. 4. You’ve Talked to a Mortgage Professional Let’s be real—there’s a lot of info out there about buying a home. Google searches and TikToks can only take you so far. If you're serious about buying, speaking with a mortgage professional is the most effective next step. Why? Because you'll: Get pre-approved (and know what price range you're working with) Understand your loan options and the qualification process Build a game plan that suits your timeline and financial goals The Bottom Line: Being “ready” to buy a home isn’t just about how much you want it—it’s about being financially prepared, credit-ready, and backed by expert advice. If you’re thinking about homeownership, let’s chat. I’d love to help you understand your options, crunch the numbers, and build a plan that gets you confidently across the finish line—keys in hand.
