The Bank of Canada announced today that it would lower its overnight lending rate to 0.75 per cent from 1 per cent, which is the first time the Bank has changed its rate in over four years.
The advertised five-year lending rate is 4.79 per cent, which hasn’t changed since the last rate announcement on December 3, 2014, which is down by 0.45 per cent from December of last year.
In a press release, the Bank of Canada said, “The oil price shock is occurring against a backdrop of solid and more broadly-based growth in Canada in recent quarters. Outside the energy sector, we are beginning to see the anticipated sequence of increased foreign demand, stronger exports, improved business confidence and investment, and employment growth.”
According to the Canadian Real Estate Association, “The cut to the Bank’s interest rate will act as another shoulder against the wheel pushing Canada’s economy in this direction while helping put a floor under falling inflation. Even before the surprise rate cut, a rising spread between bond and mortgage rates was already putting downward pressure on five year fixed lending rate mortgages.”