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The Bank of Canada (BoC) lowered it target for the overnight rate by 50 basis points to 1.25% this week. The Bank rate is correspondingly 1.50% and the deposit rate is 1%. Canada’s Prime rate also fell to 3.45% (from 3.95%) today for the first time since July 2018.

This is good news for floating-rate mortgage holders and those with Home Equity Lines of Credit or regular Lines of Credit. This is all thanks to Canada’s big banks passing along the full 50-bps rate cut delivered by the Bank of Canada yesterday.

Many were expecting the banks to keep some of the those savings for themselves to shore up their own balance sheets, but fortunately that is not he case. An exception is TD Bank’s mortgage prime rate, which remains 15 bps higher at 3.60% as opposed to its regular prime rate of 3.45% that applies to HELOC’s.

The BoC noted: ‘While Canada’s economy has been operating close to potential with inflation on target, the COVID-19 virus is a material negative shock to the Canadian and global outlooks and monetary and fiscal authorities are responding.’ Furthermore , the bank adds that “as the situation evolves, Governing Council stands ready to adjust monetary policy further if required, to support economic growth and keep inflation on target. While markets continue to function well, the Bank will continue to ensure that the Canadian financial system has sufficient liquidity.”

It is becoming clear that the first quarter of 2020 will be weaker than the Bank had expected. The drop in Canada’s terms of trade, if sustained, will weigh on income growth. Many experts expect the Bank of Canada to deliver another 25-bps rate cut next month, and potentially another quarter-point cut before the end of the year, which would bring Canada’s overnight rate to 0.75%. The next scheduled date for announcing the overnight rate target is April 15, 2020.

The best Variable 5-year rate that we can offer currently is 2.85% and the Fixed 5-year rate at 2.64% (over 30 year). If you have any questions about your existing mortgage, or are thinking of making any changes, don’t hesitate to contact us.

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