Blog Layout

Bank of Canada Rate Announcement Sept 6th, 2023

Rabinder Dhillon • September 6, 2023

Bank of Canada maintains policy rate, continues quantitative tightening.


FOR IMMEDIATE RELEASE

Media Relations

Ottawa, Ontario

September 6, 2023


The Bank of Canada today held its target for the overnight rate at 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank is also continuing its policy of quantitative tightening.


Inflation in advanced economies has continued to come down, but with measures of core inflation still elevated, major central banks remain focused on restoring price stability. Global growth slowed in the second quarter of 2023, largely reflecting a significant deceleration in China. With ongoing weakness in the property sector undermining confidence, growth prospects in China have diminished. In the United States, growth was stronger than expected, led by robust consumer spending. In Europe, strength in the service sector supported growth, offsetting an ongoing contraction in manufacturing. Global bond yields have risen, reflecting higher real interest rates, and international oil prices are higher than was assumed in the July Monetary Policy Report (MPR).


The Canadian economy has entered a period of weaker growth, which is needed to relieve price pressures. Economic growth slowed sharply in the second quarter of 2023, with output contracting by 0.2% at an annualized rate. This reflected a marked weakening in consumption growth and a decline in housing activity, as well as the impact of wildfires in many regions of the country. Household credit growth slowed as the impact of higher rates restrained spending among a wider range of borrowers. Final domestic demand grew by 1% in the second quarter, supported by government spending and a boost to business investment. The tightness in the labour market has continued to ease gradually. However, wage growth has remained around 4% to 5%.


Recent CPI data indicate that inflationary pressures remain broad-based. After easing to 2.8% in June, CPI inflation moved up to 3.3% in July, averaging close to 3% in line with the Bank’s projection. With the recent increase in gasoline prices, CPI inflation is expected to be higher in the near term before easing again. Year-over-year and three-month measures of core inflation are now both running at about 3.5%, indicating there has been little recent downward momentum in underlying inflation. The longer high inflation persists, the greater the risk that elevated inflation becomes entrenched, making it more difficult to restore price stability.


With recent evidence that excess demand in the economy is easing, and given the lagged effects of monetary policy, Governing Council decided to hold the policy interest rate at 5% and continue to normalize the Bank’s balance sheet. However, Governing Council remains concerned about the persistence of underlying inflationary pressures, and is prepared to increase the policy interest rate further if needed. Governing Council will continue to assess the dynamics of core inflation and the outlook for CPI inflation. In particular, we will be evaluating whether the evolution of excess demand, inflation expectations, wage growth and corporate pricing behavior are consistent with achieving the 2% inflation target. The Bank remains resolute in its commitment to restoring price stability for Canadians. 


Information note

The next scheduled date for announcing the overnight rate target is October 25, 2023. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the Monetary Policy Report 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: