Bank of Canada Mortgage Rate Announcement - January 2022

January 28, 2022 | Posted by: Ron Chan

Bank of Canada Mortgage Rate Announcement - January 2022

The Bank of Canada (BoC) has made their first prime rate announcement of 2022. While everyone expected the rate to stay the same throughout all of 2021, some industry insiders predicted that the BoC would raise it with their Q1 announcement on the final Wednesday of January. New home buyers throughout Canada wait with bated breath to find out if the cost of buying a home will increase so early in the annum. Will it? Or is it still the perfect time to get a mortgage in Winnipeg? Let's review.

What Home Buyers Need to Know About the January 2022 Bank of Canada Announcement Regarding Lending Rates

Prime Rate Maintains

Fret not, as the Bank of Canada has committed to holing the overnight rate is at .25 percent. New buyers who are leaning towards a variable rate mortgage are happy to hear this news. 

The cause and effect relationship between the Bank of Canada's overnight rate and variable mortgage rates indicates that the latter will stay as relatively low as they have been. At press, BMO's 5 Year Variable is listed at 1.65% which is exactly what it was after the December 2021 Bank of Canada announcement. RBC has raised their marketed 5 Year Variable to over 1.7%, which is still low, but higher than what it was in December. CIBC is neck and neck with BMO at 1.65% (advertised) as well. TD on the other hand maintains their highly-competitive advertised variable rate of just 1.55%. We expect these to maintain through Q1 of 2022, which is great news for you. 

But don't go and out and approach lenders on your own.

Remember that you can get even better rates when you partner with a reputable mortgage broker. For instance, in Winnipeg, our brokerage's Ron Chan (of INVIS Canada) has access to bulk discounts with lending institutions. These discounts are passed down to new buyers in the form of lower borrowing rates and/or other favorable mortgage terms. Of course, how significant these discounted rates and preferred terms (from banks) will be, are contingent upon your financial status (past, present, and future). That said, you needn't worry if you don't have well established credit history. A reputable mortgage broker can still leverage the Bank of Canada's commitment to maintaining the cost of borrowing by tapping into their private lending resources. With alternative lenders, a broker can get you mortgage terms more appropriate to your financial status. Long story short, with a broker you have many more options for taking advantage of the BoC's announcement regarding the economy and cost of borrowing.

When Will Rates Rise?

The following statement from the Bank of Canada's January 26 press release provides some insight into what's to come:

'The economy entered 2022 with considerable momentum, and a broad set of measures are now indicating that economic slack is absorbed. With strong employment growth, the labour market has tightened significantly. Job vacancies are elevated, hiring intentions are strong, and wage gains are picking up. Elevated housing market activity continues to put upward pressure on house prices [...] The Governing Council expects interest rates will need to increase, with the timing and pace of those increases guided by the Bank’s commitment to achieving the 2% inflation target.'

This gives buyers some breathing room. If the overnight rate is increased in 2022, it will not likely occur until the fourth quarter because the inflation rate right now is well above 4%. That's not going to change overnight (pun intended).

What about fixed rate mortgages?

Once again we look to another statement from the Bank of Canada's January 26 press release:

'The Bank will keep its holdings of Government of Canada bonds on its balance sheet roughly constant at least until it begins to raise the policy interest rate. At that time, the Governing Council will consider exiting the reinvestment phase and reducing the size of its balance sheet by allowing roll-off of maturing Government of Canada bonds.'

Bank of Canada bond market activity is tied to fixed rate mortgages. So no change in the former indicates stability in the latter. For example, RBC's 5 Year Fixed rate is pegged at 3.07% which is the same as it was in December of 2021. And like with variable rate mortgages, a reputable mortgage broker can get you access to lower unadvertised fixed rates too. All you need to do is ask.

If buying a home in Winnipeg, contact Ron Chan today at 204.290.9950 to get access to these special fixed mortgage rates and to learn more about incentive programs.

Back to Main Blog Page