On December 6, 2017, the Bank of Canada announced it was keeping its trend-setting overnight lending rate on hold at 1%. The rate rose by 0.25% in July and again in September. Since then, the Bank has continued to caution that future interest rate increases depend on whether economic data suggest that inflation is starting to percolate.

The Canadian economy has been evolving broadly in line with the Bank’s October forecast. That said, the Bank has pointed to elevated global risks, in particular the renegotiation of NAFTA.

The Bank also remains vigilant for signs of rising inflation and wage growth, both of which would lend support to further rate hikes next year.

As of December 6, 2017, the benchmark five-year lending rate stood at 4.99%, which is the rate used to qualify mortgages with less than a 20% down payment, and as of January 1, 2018, all mortgages.

The benchmark five-year lending rate is 0.1 percentage points higher than it was just before the Bank made its previous interest rate announcement on October 25, and up 0.35 percentage points versus one year ago.

Canada’s major chartered banks have recently raised their advertised five-year fixed mortgage interest rates, which now range between 3.34% and 4.99%. However, actual five-year fixed mortgage interest rates can be negotiated below advertised rates depending on mortgage applicants’ creditworthiness and the degree to which they do other banking business with the mortgage lender.

The next interest rate announcement will be on January 17, 2018. The Bank of Canada’s Monetary Policy Report, which updates the Bank’s economic forecast, will accompany that announcement.

(CREA 06/12/2017)