As expected, the Bank of Canada confirmed this morning that they will be maintaining their overnight rate in their final scheduled rate announcement for 2020. This is the rate mortgage lenders use to set their prime rates, which affects variable rate mortgages, as well as HELOCs (Home Equity Lines of Credit). The BOC announcements do not have any direct effect on fixed mortgage rates, which are influenced by bond yields.

Nothing surprising here, as their decision to maintain the status quo was practically guaranteed. As prime rate is not expected to change for the foreseeable future, I would not expect too much excitement from these announcements throughout 2021, as same decision can be expected each and every time. The BOC has been pretty clear that they do not expect to increase their overnight rate until sometime in 2023, however, I would not be surprised if they held it for longer. Time will tell of course.

 

The COVID Vaccines And Their Relation To Mortgage Rates
With the new COVID vaccines expected to be widely distributed in the first half of 2021, there are many who are predicting that this will mean the end of the pandemic. I would not expect it to happen abruptly however, and it will take time. The distribution of the vaccine is only part of the solution. The other is getting people to take it. While there are many who will jump on the chance to get vaccinated ASAP, others will be more hesitant. Some are uneasy about taking a vaccine that was rushed and will want to wait to see if any unknown side effects arise. There are others who will not want to take at all. The introduction of vaccines will not automatically bring the pandemic to an end. This will take time, and will unfortunately be a slow process. Until it becomes clear to everyone that the pandemic is behind us, mortgage rates will remain at or near record low levels.

 

Mortgage Rate Competition Heating Up
The mortgage rate market is highly competitive, but it’s becoming more intense as we round out 2020. While there was evidence that mortgage rates had bottomed out, it’s likely that we will see them fall even further within the next couple of weeks. It’s fairly safe to say that we’ll get to enjoy historical low rates throughout 2021.

Economic growth has been stronger than previously expected, but with COVID numbers increasing and new restrictions being implemented, there is still much uncertainty moving forward. The BOC continues with it’s quantitative easing program pumping out stimulus at a rate of $4 billion per week, and will continue at this pace for as long as needed. This is evidence that mortgage rates are not expected to increase for the foreseeable future. There may be times when we see small upward movement, but I wouldn’t anticipate any significant upward trends to begin at any time throughout 2021.

Please leave any questions or comments below!

 

Enter Our Holiday Decorating Contest on our Facebook page for a chance to win a $300 Amazon gift card!