BoC’s recent rate hikes were intended to reverse two rate cuts

In a speech given last Wednesday, Bank of Canada Governor Stephen Poloz said the BoC’s recent benchmark rate hikes were specifically intended to reverse the two rate cuts it had made in response to the oil-price shock of 2015. These rate hikes were not intended to be the first rounds of a broader monetary-policy tightening cycle. 

Going forward, Poloz described the central bank’s approach as being “data dependent” and committed to keeping its inflationary targets “front and centre”.  

“The economic progress that we have seen tells us that the moves we took to ease policy in 2015 were the right thing to do. At a minimum, that additional stimulus is no longer needed, but there is no predetermined path for interest rates from here,” Poloz said.

Five-year Government of Canada (GoC) yields fell seven basis points last week, closing at 1.75% on Friday. Five-year fixed-rate mortgages are still available at rates as low as 2.79% for high-ratio buyers and 2.89% for low-ratio buyers. Rates are dependent on the size of down payments and the purchase price of the property.

Meanwhile, borrowers looking to refinance can find five-year fixed-rates in the 3.24% to 3.34% range.

Five-year variable-rate mortgage discounts remain largely unaltered and are still available at rates as low as prime minus 0.90% (2.30% today) for high-ratio buyers and prime minus 0.75% (2.45% today) for low-ratio buyers. These rates depend on the size of the buyer’s down payment and the purchase price of the property.

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