Bank of Canada maintains overnight rate target at 1 per cent

FOR IMMEDIATE RELEASE 18 January 2011

CONTACT: Jeremy Harrison 613 782-8782

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Bank of Canada maintains overnight rate target at 1 per cent

OTTAWA –The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

The global economic recovery is proceeding at a somewhat faster pace than the Bank had anticipated, although risks remain elevated. Private domestic demand in the United States has picked up and will be reinforced by recently announced monetary and fiscal stimulus. European growth has also been slightly stronger than anticipated. Ongoing challenges associated with sovereign and bank balance sheets will limit the pace of the European recovery and are a significant source of uncertainty to the global outlook. In response to overheating, some emerging markets have begun to implement more restrictive policy measures. Their effectiveness will influence the path of commodity prices, which have increased significantly since the October Monetary Policy Report (MPR), largely reflecting stronger global growth.

The recovery in Canada is proceeding broadly as anticipated, with a period of more modest growth and the beginning of the expected rebalancing of demand. The contribution of government spending is expected to wind down this year, consistent with announced fiscal plans. Stretched household balance sheets are expected to restrain the pace of consumption growth and residential investment. In contrast, business investment will likely continue to rebound strongly, owing to stimulative financial conditions and competitive imperatives. Net exports are projected to contribute more to growth going forward, supported by stronger U.S. activity and global demand for commodities. However, the cumulative effects of the persistent strength in the Canadian dollar and Canada’s poor relative productivity performance are restraining this recovery in net exports and contributing to a widening of Canada’s current account deficit to a 20-year high.

Overall, the Bank projects the economy will expand by 2.4 per cent in 2011 and 2.8 per cent in 2012 – a slightly firmer profile than had been anticipated in the October MPR. With a little more excess supply in the near term, the Bank continues to expect that the economy will return to full capacity by the end of 2012.
Underlying pressures affecting prices remain subdued, reflecting the considerable slack in the Canadian economy. Core inflation is projected to edge gradually up to 2 per cent by the end of 2012, as excess supply in the economy is slowly absorbed. Inflation expectations remain well-anchored.  Total CPI inflation is being boosted temporarily by the effects of provincial indirect taxes, but is expected to converge to the 2 per cent target by the end of 2012.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of significant excess supply in Canada. Any further reduction in monetary policy stimulus would need to be carefully considered. 


Information note:
A full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on 19 January 2011. The next scheduled date for announcing the overnight rate target is 1 March 2011.

Bank of Canada maintains overnight rate target at 1 per cent

OTTAWA (07/12/2010) – The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.


The global economic recovery is proceeding largely as expected, although risks have increased. As anticipated, private domestic demand in the United States is picking up slowly, while growth in emerging-market economies has begun to ease to a more sustainable, but still robust, pace. In Europe, recent data have been consistent with a modest recovery. At the same time, there is an increased risk that sovereign debt concerns in several countries could trigger renewed strains in global financial markets.

The recovery in Canada is proceeding at a moderate pace, although economic activity in the second half of 2010 appears slightly weaker than the Bank projected in its October Monetary Policy Report. In the third quarter, household spending was stronger than the Bank had anticipated and growth in business investment was robust. However, net exports were weaker than projected and continued to exert a significant drag on growth. This underlines a previously-identified risk that a combination of disappointing productivity performance and persistent strength in the Canadian dollar could dampen the expected recovery of net exports.

Inflation dynamics in Canada have been broadly in line with the Bank's expectations and the underlying pressures affecting prices remain largely unchanged.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of significant excess supply in Canada. Any further reduction in monetary policy stimulus would need to be carefully considered. 

Information note:
The next scheduled date for announcing the overnight rate target is 18 January 2011. A full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the Monetary Policy Report on 19 January 2011.
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Selecting the right mortgage term

Selecting the mortgage term that is right for you can be a challenging proposition for even the savviest of homebuyers, as terms typically range from six months up to 10 years.

By understanding mortgage terms and what they mean in dollars and sense, you can save the most money and choose the term that is best suited to your specific needs.

The first consideration when comparing various mortgage terms is to understand that a longer term generally means a higher corresponding interest rate. And, a shorter term generally means a lower corresponding interest rate. While this generalization may lead you to believe that a shorter term is always the preferred option, this is not always the case. Sometimes there are other factors – either in the financial markets or in your own life – that you will also have to take into consideration when selecting the length of your mortgage term.

If paying your mortgage each month places you close to the financial edge of your comfort zone, you may want to opt for a longer mortgage term, such as five or 10 years, so that you can ensure that you will be able to afford your mortgage payments should interest rates increase.

By the end of a five- or 10-year mortgage term, most buyers are in a better financial situation, have a lower outstanding principal balance and, should interest rates have risen throughout the course of their term, will be able to afford higher mortgage payments.

If you are shopping for a mortgage for an investment property, you will likely want to consider choosing a longer mortgage term – depending, of course, on your overall plan. This will allow you to know that the mortgage payments on the property will be steady for a long time and enable you to more accurately project your future income from the property.

As well, if you know you will not be staying in the same home for the next five or 10 years, opting for a shorter term can save you significant fees when it comes to early payout penalties.

Choosing the right mortgage term is a unique decision for each individual. By understanding your personal financial situation and your tolerance for risk, I can assist you in choosing the mortgage term that will work best for your situation.

As always, if you have any questions about mortgage terms or your mortgage in general, I’m here to help!

Canada's major banks reduce mortgage rates again

Interest rates have been reduced again by 1/10th of a percentage point by each of Canada's big five banks. The new lower interest rates took effect yesterday.


The posted five-year closed mortgage rate is now 5.49 per cent annually with Royal Bank of Canada leading the way and followed by Bank of Montreal, Scotiabank, CIBC and TD Bank.

This is the second time major banks have lowered their rates this month, and follows the report from the Canadian Real Estate Association that home sales were down 6.8 per cent in July from the previous month.

 To keep informed of the latest interest rates, you can sign up for my Rate Minder email - click here - or you can also visit my website - Richmond Hill Mortgages -  to check the latest mortgages rates and use the mortgage calculators.

New report indicating that home prices will stabilize

The Canadian Real Estate Association (CREA) released a new report indicating that home prices will stabilize, and remain stable for some time.

This means that Canadian homeowners are unlikely to experience a US-style decline in the value of their homes.

“The relationship between average price and income has recently been cited as portending a US-style correction in Canadian home prices,” said Gregory Klump, Chief Economist, CREA. “However, such warnings ignore the longer-term relationship between prices and income, and disregard typical Canadian housing market cycle dynamics.”

Click here to read the CREA report.

Premier tips his hat

Ontario Premier Dalton McGuinty shares a laugh with Richmond Hill Chamber of Commerce chairperson David West (right) and Dominion Lending Centres Mortgage Agent Greg Barrow prior to the Richmond Hill Chamber of Commerce’s business achievement awards Wednesday night at the Sheraton Parkway Hotel. Mr. McGuinty was the keynote speaker at the awards ceremony.
Staff Photo/Steve Somerville

Read Full Article: http://www.yorkregion.com/news/article/626629--premier-tips-his-hat

New Canadian Mortgage Rules to Come into Force April 19th, 2010

Federal Finance Minister Jim Flaherty announced changes to mortgage insurance rules which are set to come into force on April 19th, 2010.

This means the government will adjust the rules for government-backed insured mortgages as follows:

1) Require that all borrowers meet the standards for a five-year fixed-rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future.

2) Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90% from 95% of the value of their homes. This will help ensure home ownership is a more effective way to save.

3) Require a minimum down payment of 20% for government-backed mortgage insurance on non-owner-occupied properties.

There were no changes to down payment requirements or length of amortizations for owner-occupied residences.

Click here for additional details on the changes.

DLC supports the Government's measures as a prudent and balanced approach.

We've seen a rise in consumer debt and we anticipate interest rates will go up in the future, so it makes sense to put policies in place early to protect consumers.

These changes will help moderate the market without being too severe. They help protect first-time home buyers.