Bank of Canada Mortgage Rate Announcement - January 2021

January 25, 2021 | Posted by:

Bank of Canada Mortgage Rate Announcement - January 2021

As a follow up to the earlier Bank of Canada Economic Outlook Report for 2021 the BoC has made its first interest rate announcement of the year. Did it go as expected? Will our corresponding mortgage predictions for the annum ahead come to fruition based on what we’re hearing so far? Let’s find out what was included (as it applies to buyers) in the Bank of Canada’s most recent announcement.

Bank of Canada Overnight Rate Stands at .25%

Towards the end of 2020 the BoC stated that they would not increase the prime rate until their 2-percent inflation objective is achieved. Based on that, most experts concluded that there would indeed be no rate hike until 2022. 

However, there is now an economic surge on the horizon. Previously it was assumed that any economic growth for 2021 would be a claw-back. But just as soon as it was clear that Trump would be leaving office, the news of the COVID-19 vaccine arrived. While there have been hiccups in the supply chain, vaccinations are well underway in Canada. At press, there have been nearly 1 million at-risk people vaccinated in the country (approximately 30,000 in Manitoba). Through the spring millions more will have had a shot in the arm, proverbially providing the same for the economy. The math is simple. The more people that can wander freely without concern the more they will return to normal consumer activity and from there the more businesses will resume (and grow upon) pre-pandemic revenue numbers. This will in turn stimulate the economy (more hiring, spending, etc.) perhaps just as quickly as it was shuttered back in March of 2020. 

“And that reassurance came despite the central bank's outlook of a startling transition from a shrinking economy in the first three months of the year to extraordinarily strong growth of 4% in 2021 and 5% next year.” (Don Pittis, CBC News, January 21, 2021)

But despite this great forecast, the BoC is sticking to its guns and keeping the rate at .25%. This is because the Canadian economy will continue to require extremely significant monetary policy support. A few (and we mean few) experts are suggesting that a strong economic rebound this year could lead to fast rise in inflation and require the BoC to raise interest rates and ultimately mortgage rates (leading to another slowdown) BUT this is not likely. This is not a normal recession that we’re coming out of. It’s a record-breakingly deep hole that will require slow and steady movements to come out of. Think of it in the same way that every movie has taught you about how to get out of quick sand. 

If there is a prime rate rise in the third or even fourth quarter of 2021, it will have a negligible impact on mortgage rates. Keep in mind that buyers are currently enjoying the lowest mortgage rates of all time. A move up in rates is not one that will cut buying power at the knees. This is especially true in Winnipeg which boasts the lowest average price of a home when compared to the other major cities in Canada.

Take advantage of this massive opportunity to enter the real estate market in Winnipeg by contacting Ron Chan. Call 204.222.9950 for a mortgage pre approval or simply for a friendly conversation about your goals. Stay tuned here for the next official Bank of Canada announcement regarding the overnight rate (and mortgage rates) which is scheduled for March 10, 2021.

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