You may have heard The Bank of Canada has decided to keep it’s interest rate at one percent for the 17th consecutive time today. What does this mean for you?
The BOC (Bank of Canada) has control of the overnight rate, which determines the interest rate that major financial lenders and institutions lend and borrow one day funds between each other. When the BOC changes the overnight rate, it changes the cost of short term funds; this in turn will change the lenders prime rate.
The overnight rate also influences other interest rates, such as those for consumer loans and mortgages. They can also affect the exchange rate of the Canadian dollar. All variable mortgages are based on prime rate so if a any changes are made it may affect your interest rate.
BOC Overnight Rate: 1%
Bank Prime Rate: 3%
Your Variable Rate: 2.2% (prime -.8)
BOC decides to to increase overnight rate by .25%
BOC Overnight Rate: 1.25%
Bank Prime Rate: 3.25%
Your Variable Rate: 2.45% (prime -.8)
We don’t expect any changes to the overnight rate until late 2013. The Bank of Canada has 8 scheduled meetings per year. To view upcoming meetings please check out their website http://www.bankofcanada.ca/monetary-policy-introduction/key-interest-rate/schedule/.
The next scheduled meeting is December 4, 2012