With anxiety mounting throughout March as the economic impacts of the COVID-19 pandemic intensified, Canada’s central bank took swift action to slash interest rates at several points during the month.

The cut announced by the Bank of Canada on March 27th meant that the overnight rate — which influences mortgage rates — had reached a level not seen since the 2008-2009 global recession. The rate, at 0.25 percent, sits at the “effective lower bound” established by the bank, which means that it does not intend to lower it further to zero or into negative territory.

In a comprehensive housing report published earlier this month, BMO Senior Economist Robert Kavcic wrote that the central bank is unlikely to hike the rate until 2022.

The report, titled “Canadian Real Estate: Closed Until Further Notice,” Kavcic noted that the rapid cuts to the overnight rate have led five-year fixed-rate mortgages to decline to levels that match historic lows. Rates are available in the 2.4 percent to 2.6 percent range, said Kavcic, 50 points lower than rates seen last year, which were already very low by historical standards.

The BMO economist believes that the low rate environment will be the most significant, immediate support to the country’s housing market as the economy gradually reopens and business resumes over the next few months.

“[Low rates] will support demand as the economy re-opens, and we don’t believe Bank of Canada rate hikes are on the horizon until 2022,” wrote Kavcic.

The Bank of Canada’s next scheduled interest rate announcement is due on June 3rd, which is also the date that Tiff Macklem is set to assume the role of governor, taking over the position current governor Stephen Poloz has held since 2013.

It is unlikely that the bank will move the rate any lower even under new leadership, though Macklem, who was an associate deputy minister in the Department of Finance during the 2008-2009 financial crisis, has said it’s important to deliver an unprecedented response to this unprecedented situation.

One thing that appears to be certain is that mortgage rates will remain historically low for many months, or even years, to come.

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