Bank of Canada Rate Announcement Dec 9th, 2020
Erik Sepper • December 9, 2020
Bank of Canada will maintain current level of policy rate until inflation objective is achieved, continues its quantitative easing program.
The Bank of Canada today maintained its target for the overnight rate at the effective lower bound of ¼ percent, with the Bank Rate at ½ percent and the deposit rate at ¼ percent. The Bank is maintaining its extraordinary forward guidance, reinforced and supplemented by its quantitative easing (QE) program, which continues at its current pace of at least $4 billion per week.
The rebound in the global and Canadian economies has unfolded largely as the Bank had anticipated in its October Monetary Policy Report (MPR). More recently, news on the development of effective vaccines is providing reassurance that the pandemic will end and more normal activities will resume, although the pace and breadth of the global rollout of vaccinations remain uncertain. Near term, new waves of infections are expected to set back recoveries in many parts of the world. Accommodative policy and financial conditions are continuing to provide support across most regions. Stronger demand is pushing up prices for most commodities, including oil. A broad-based decline in the US exchange rate has contributed to a further appreciation of the Canadian dollar.
In Canada, national accounts data for the third quarter were consistent with the Bank’s expectations of a sharp economic rebound following the precipitous decline in the second quarter. The labour market continues to recoup the jobs that were lost at the start of the pandemic, albeit at a slower pace. However, activity remains highly uneven across different sectors and groups of workers. Economic momentum heading into the fourth quarter appears to be stronger than was expected in October but, in recent weeks, record high cases of COVID-19 in many parts of Canada are forcing re-imposition of restrictions. This can be expected to weigh on growth in the first quarter of 2021 and contribute to a choppy trajectory until a vaccine is widely available. The federal government’s recently announced measures should help maintain business and household incomes during this second wave of the pandemic and support the recovery.
CPI inflation in October picked up to 0.7 percent, largely reflecting higher prices for fresh fruits and vegetables. While this suggests a slightly firmer track for inflation in the fourth quarter, the outlook for inflation remains in line with the October MPR projection. Measures of core inflation are all below 2 percent, and considerable economic slack is expected to continue to weigh on inflation for some time.
Canada’s economic recovery will continue to require extraordinary monetary policy support. The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In our October projection, this does not happen until into 2023. To reinforce this commitment and keep interest rates low across the yield curve, the Bank will continue its QE program until the recovery is well underway and will adjust it as required to help bring inflation back to target on a sustainable basis. We remain committed to providing the monetary policy stimulus needed to support the recovery and achieve the inflation objective.
Information note
The next scheduled date for announcing the overnight rate target is January 20, 2021. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR at the same time.
Subsequent to the Bank’s previously announced
review of the publication time of its interest rate announcements, the Bank re-confirms that it will remain at 10:00 (ET). As announced, starting in January the target for the overnight rate will take effect on the business day following each rate announcement.
When you’re buying a home, two terms often cause confusion: deposit and down payment . While they’re related, they serve very different purposes in the homebuying process. Here’s what you need to know. What Is a Deposit? A deposit is the money you provide when you make an offer on a property. Think of it as a show of good faith that proves you’re serious about purchasing. How it works : Typically, you provide a certified cheque or bank draft that your real estate brokerage holds in trust. If your offer is accepted, the deposit remains in trust until the deal moves forward. If negotiations fall through, the deposit is refunded. Connection to your down payment : Once the sale is finalized, your deposit becomes part of your total down payment. Why it matters : The amount is negotiable, but a larger deposit can make your offer more attractive in a competitive market. Keep in mind, however, that if you back out after conditions are removed, you risk losing your deposit. What Is a Down Payment? Your down payment is the amount you contribute toward the purchase price of your home when securing a mortgage. Minimum requirement : In Canada, the minimum down payment is 5% of the home’s purchase price. Anything less than 20% requires mortgage default insurance. Sources : Down payments can come from your savings, the sale of another property, RRSP withdrawals (through the Home Buyers’ Plan), a gift from family, or even borrowed funds. Example: How They Work Together Imagine you’re buying a $400,000 home with a 10% down payment ($40,000). When you make your offer, you provide a $10,000 deposit . Once conditions are met, that deposit is transferred to your lawyer’s trust account. At closing, you add the remaining $30,000 to complete your full down payment. The lender provides the rest—$360,000—through your mortgage. The Bottom Line Your deposit shows commitment and secures your offer, while your down payment is what makes the mortgage possible. Together, they work hand in hand to get you into your new home. 📞 If you’d like clarity on deposits, down payments, or any other part of the mortgage process, let’s connect. I’d be happy to walk you through it step by step.
When you apply for a mortgage, your employment history and status carry a lot of weight. Even if you feel secure in your job, lenders need proof that your income is reliable and will continue. To them, your employment status is one of the strongest indicators of whether you can make your mortgage payments long term. Here’s how lenders typically view different employment situations: Permanent Employment This is the gold standard. Once you’ve passed any probationary period and hold permanent status, lenders see you as a lower risk. It shows that your employer is committed to you, and your income is steady. Probationary Periods If you’re still on probation—usually 3 to 6 months, though sometimes longer—lenders may hesitate. That’s because your employer can end your contract without cause during this period. Once probation is over, you’re considered more secure. That said, context matters. If you’ve worked with the same company for years as a contractor and just transitioned into full-time employment, lenders may accept a letter from your employer confirming that probation is waived. Documentation is key here. Parental Leave Being on or about to take parental leave doesn’t mean you can’t qualify for a mortgage. As long as you have a letter from your employer guaranteeing your position and return-to-work date, lenders can use your regular salary—not your leave income—when assessing your application. Term Contracts This is one of the trickiest categories. Even highly skilled professionals with strong incomes can face challenges here. A term contract has a start and end date, which makes lenders question the stability of your future income. To use term-contract income, lenders generally want to see at least two years of history, or proof that your contract has already been renewed. The more evidence you can show of consistent employment, the stronger your case will be. The Bottom Line If you’re planning to apply for a mortgage, it’s important to understand how your employment status could affect your approval. Whether you’re starting a new job, coming back from leave, or working under contract, lenders want documentation that proves your income is reliable. 📞 If you’ve recently changed jobs or are planning a career shift, let’s connect. I can help you prepare your file so you qualify with confidence and avoid surprises in the approval process.
Your credit score is one of the most important numbers in your financial life — especially when it comes to getting a mortgage. But for most Canadians, how that number actually gets calculated remains a bit of a mystery.