Blog Layout

Bank of Canada Rate Announcement Dec 11th, 2024

Rabinder Dhillon • December 11, 2024

Bank of Canada reduces policy rate by 50 basis points to 3¼%.


FOR IMMEDIATE RELEASE

Media Relations

Ottawa, Ontario

December 11, 2024


The Bank of Canada today reduced its target for the overnight rate to 3¼%, with the Bank Rate at 3¾% and the deposit rate at 3¼%. The Bank is continuing its policy of balance sheet normalization.


The global economy is evolving largely as expected in the Bank’s October Monetary Policy Report (MPR). In the United States, the economy continues to show broad-based strength, with robust consumption and a solid labour market. US inflation has been holding steady, with some price pressures persisting. In the euro area, recent indicators point to weaker growth. In China, recent policy actions combined with strong exports are supporting growth, but household spending remains subdued. Global financial conditions have eased and the Canadian dollar has depreciated in the face of broad-based strength in the US dollar.


In Canada, the economy grew by 1% in the third quarter, somewhat below the Bank’s October projection, and the fourth quarter also looks weaker than projected. Third-quarter GDP growth was pulled down by business investment, inventories and exports. In contrast, consumer spending and housing activity both picked up, suggesting lower interest rates are beginning to boost household spending. Historical revisions to the National Accounts have increased the level of GDP over the past three years, largely reflecting higher investment and consumption. The unemployment rate rose to 6.8% in November as employment continued to grow more slowly than the labour force. Wage growth showed some signs of easing, but remains elevated relative to productivity.


A number of policy measures have been announced that will affect the outlook for near-term growth and inflation in Canada. Reductions in targeted immigration levels suggest GDP growth next year will be below the Bank’s October forecast. The effects on inflation will likely be more muted, given that lower immigration dampens both demand and supply. Other federal and provincial policies—including a temporary suspension of the GST on some consumer products, one-time payments to individuals, and changes to mortgage rules—will affect the dynamics of demand and inflation. The Bank will look through effects that are temporary and focus on underlying trends to guide its policy decisions.


In addition, the possibility the incoming US administration will impose new tariffs on Canadian exports to the United States has increased uncertainty and clouded the economic outlook.


CPI inflation has been about 2% since the summer, and is expected to average close to the 2% target over the next couple of years. Since October, the upward pressure on inflation from shelter and the downward pressure from goods prices have both moderated as expected. Looking ahead, the GST holiday will temporarily lower inflation but that will be unwound once the GST break ends. Measures of core inflation will help us assess the trend in CPI inflation.


With inflation around 2%, the economy in excess supply, and recent indicators tilted towards softer growth than projected, Governing Council decided to reduce the policy rate by a further 50 basis points to support growth and keep inflation close to the middle of the 1-3% target range. Governing Council has reduced the policy rate substantially since June. Going forward, we will be evaluating the need for further reductions in the policy rate one decision at a time. Our decisions will be guided by incoming information and our assessment of the implications for the inflation outlook. The Bank is committed to maintaining price stability for Canadians by keeping inflation close to the 2% target.



Information note

The next scheduled date for announcing the overnight rate target is January 29, 2025. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR at the same time.


RABINDER
MORTGAGE BROKER

LET'S CONNECT

How To Improve Your Credit Score

By Rabinder Dhillon • February 19, 2025
Your credit score and how you manage credit are huge factors in qualifying for a mortgage. If you want the best interest rates and mortgage products available on the market, you want a high credit score. Here are a few things you can do to improve your credit score. Make all your payments on time. Making your payments on time is so important; in fact, it might just be the most important factor in managing your credit. Here's how credit works. When you borrow money from a lender, you agree to make payments with interest on a set schedule until the debt is repaid in full. Good credit is established and maintained by making your payments on time. However, If you break the terms of that schedule by not making your payments, the lender will report the missed payments to the credit reporting agencies, and your credit score suffers. It’s that simple. The more payments you miss, the lower your score will be. If you fail to make payments for over 120 days, the lender will most likely send your debt to be recovered by a collection agency. Collections stay on your report for a long time. So the moment you realize you have missed a payment or as soon as you have the money for it, make the payment. If something prevents you from making a payment, consider contacting the lender directly to let them know what happened and work out an arrangement to make the payment as soon as possible. It's good to note that lenders only report late payments after a payment is 30 days late. If you miss a payment on a Friday and catch it the following Monday, you won't have anything to worry about - except maybe an NSF fee. Now, just because payments don't report until being 30 days late, don’t get comfortable with making late payments; the best advice is to pay your debts on time, as agreed. Stop acquiring new credit. If you already have at least two different trade lines, you shouldn’t acquire new trade lines just for the sake of it. Of course, if you need to borrow money, like to purchase a vehicle to commute to work, go ahead and apply. Just remember: having more credit available to you doesn’t really help your credit score. In fact, each time a potential lender looks at your credit report, it may lower your credit score a little bit. With that said, if you already have two different trade lines and your lender offers you an increase on your limit, take it. A credit card with a $10k limit is better for you than a credit card with a $2k limit because how much you spend compared to your credit card's limit impacts your credit score. This leads us directly into the next point. Keep a reasonable balance. The more credit you use compared to the limit you have, the less creditworthy you appear. It’s better to carry a reasonable balance (15-25% of the card’s limit) and pay it off each month than to max out your credit cards and just make the minimum payments. If you have to spend more than 25% of your card limit, try to remain under 60%. That shows good utilization. Paying down your credit cards every month and carrying a zero balance will undoubtedly improve your credit score. Check your credit report regularly. Did you know that roughly 20% of credit reports have misinformation on them? Mistakes happen all the time. Lenders misreport information, or people with the same names get merged reports. Any number of things could be inaccurate without you knowing about it. You might even have become a victim of fraud or identity theft. By checking your credit regularly, you can stay on top of everything and correct any errors promptly. Both of Canada's credit reporting agencies, Equifax and Transunion, have programs that, for a small fee, will monitor and update you on any changes made to your credit report. Handle collections immediately. When checking your credit report for accuracy, if you happen to find a collection has been registered against you, deal with it immediately. It could be a closed-out cell phone account with a small balance owing, a final utility bill that got missed, unpaid parking tickets, wage garnishments, or spousal support payments. Regardless of what it is, it will harm your credit score if it's registered on your credit report. The best plan of action is to handle any collections or delinquent accounts as soon as possible. Use your credit card. If you have acquired credit cards to build your credit score, but you rarely use them, there is a chance the lender might not report your usage, and that won’t help your credit score. You'll want to make sure that you use your credit at least once every three months. Many people find success using their credit cards for gas and groceries and paying off the outstanding balance each month. There you have it. Regardless of what your credit looks like now, you will continue to increase your credit score if you follow the points outlined above. If you're looking to buy a property and you’d like to work through your credit report in detail, let’s put together a plan to get you qualified for a mortgage. Get in touch anytime; it would be a pleasure to work with you!

What is a “No-Frills” Mortgage?

By Rabinder Dhillon • February 12, 2025
A no-frills service or product is where non-essential features have been removed from the product or service to keep the price as low as possible. And while keeping costs low at the expense of non-essential features might be okay when choosing something like which grocery store to shop at, which economy car to purchase, or which budget hotel to spend the night, it’s not a good idea when considering which lender to secure mortgage financing. Here’s why. When securing mortgage financing, your goal should be to pay the least amount of money over the term. Your plan should include having provisions for unexpected life changes. Unlike the inconvenience of shopping at a store that doesn’t provide free bags, or driving a car without power windows, or staying at a hotel without any amenities, the so-called “frills” that are stripped away to provide you with the lowest rate mortgage are the very things that could significantly impact your overall cost of borrowing. Depending on the lender, a “no-frills” mortgage rate might be up to 0.20% lower than a fully-featured mortgage. And while this could potentially save you a few hundreds of dollars over a 5-year term, please understand that it could also potentially cost you thousands (if not tens of thousands) of dollars should you need to break your mortgage early. So if you’re considering a “no-frills” mortgage, here are a few of the drawbacks to think through: You'll pay a significantly higher penalty if you need to break your mortgage. You'll have limited pre-payment privileges. Potential limitations if you want to port your mortgage to a different property. You might be limited in your ability to refinance your mortgage (without incurring a considerable penalty). Simply put, a “no-frills” mortgage is an entirely restrictive mortgage that leaves you without any flexibility. There are many reasons you might need to keep your options open. You might need to break your term because of a job loss or marital breakdown, or maybe you decide to take a new job across the country, or you need to buy a property to accommodate your growing family. Life is unpredictable; flexibility matters. So why do banks offer a no-frills mortgage anyway? Well, when you deal with a single bank or financial institution, it’s the banker’s job to make as much money from you as possible, even if that means locking you into a very restrictive mortgage product by offering a rock bottom rate. Banks know that 2 out of 3 people break their mortgage within three years (33 months). However, when you seek the expert advice of an independent mortgage professional, you can expect to see mortgage options from several institutions showcasing mortgage products best suited for your needs. We have your best interest in mind and will help you through the entire process. A mortgage is so much more than just the lowest rate. If you have any questions about this, or if you’d like to discuss anything else mortgage-related, please get in touch. Working with you would be a pleasure!
Share by: