Bank of Canada Signals Low Rates Until 2023, Unveils Changes to QE Program

Bank of Canada Signals Low Rates Until 2023, Unveils Changes to QE Program

The Bank of Canada reaffirmed its interest rate decision on Wednesday, providing guidance that rates would remain at their effective lower bound until economic slack is absorbed. The Bank also announced changes to its Quantitative Easing program, whereby the BoC has been purchasing bonds to maintain market liquidity. The Bank expects the economy to grow by 4% on average each year, and fixed rates are expected to remain low due to the Bank's renewed commitment to purchasing longer-term bonds. This announcement affects both fixed and variable rates, with fixed rates expected to remain low due to the Bank's renewed commitment to purchasing longer-term bonds. The Bank of Canada's guidance on maintaining its overnight rate at 0.25% until at least 2023 bodes well for existing variable-rate holders, but new floating-rate mortgage holders aren't likely to see their rates fall any further.

A recent BMO survey found that 57% of first-time buyers said they'll choose a fixed rate when they're ready to secure their mortgage, and another 30% said COVID has made them more likely to choose a fixed rate. Economists believe the overnight rate will remain at 0.25% into 2024, as the pandemic will determine the health of the economy and thus, monetary policy.