Bank of Canada Rate Announcement Jan 26th, 2022

Wyatt Tunnicliffe • January 26, 2022

Bank of Canada maintains policy rate, removes exceptional forward guidance.


FOR IMMEDIATE RELEASE

Media Relations

Ottawa, Ontario

January 26, 2022


The Bank of Canada today held its target for the overnight rate at the effective lower bound of ¼ %, with the Bank Rate at ½ % and the deposit rate at ¼ %. With overall economic slack now absorbed, the Bank has removed its exceptional forward guidance on its policy interest rate. The Bank is continuing its reinvestment phase, keeping its overall holdings of Government of Canada bonds roughly constant.


The global recovery from the COVID-19 pandemic is strong but uneven. The US economy is growing robustly while growth in some other regions appears more moderate, especially in China due to current weakness in its property sector. Strong global demand for goods combined with supply bottlenecks that hinder production and transportation are pushing up inflation in most regions. As well, oil prices have rebounded to well above pre-pandemic levels following a decline at the onset of the Omicron variant of COVID-19. Financial conditions remain broadly accommodative but have tightened with growing expectations that monetary policy will normalize sooner than was anticipated, and with rising geopolitical tensions. Overall, the Bank projects global GDP growth to moderate from 6¾ % in 2021 to about 3½ % in 2022 and 2023.


In Canada, GDP growth in the second half of 2021 now looks to have been even stronger than expected. The economy entered 2022 with considerable momentum, and a broad set of measures are now indicating that economic slack is absorbed. With strong employment growth, the labour market has tightened significantly. Job vacancies are elevated, hiring intentions are strong, and wage gains are picking up. Elevated housing market activity continues to put upward pressure on house prices.


The Omicron variant is weighing on activity in the first quarter. While its economic impact will depend on how quickly this wave passes, it is expected to be less severe than previous waves. Economic growth is then expected to bounce back and remain robust over the projection horizon, led by consumer spending on services, and supported by strength in exports and business investment. After GDP growth of 4½ % in 2021, the Bank expects Canada’s economy to grow by 4% in 2022 and about 3½ % in 2023.


CPI inflation remains well above the target range and core measures of inflation have edged up since October. Persistent supply constraints are feeding through to a broader range of goods prices and, combined with higher food and energy prices, are expected to keep CPI inflation close to 5% in the first half of 2022. As supply shortages diminish, inflation is expected to decline reasonably quickly to about 3% by the end of this year and then gradually ease towards the target over the projection period. Near-term inflation expectations have moved up, but longer-run expectations remain anchored on the 2% target. The Bank will use its monetary policy tools to ensure that higher near-term inflation expectations do not become embedded in ongoing inflation.


While COVID-19 continues to affect economic activity unevenly across sectors, the Governing Council judges that overall slack in the economy is absorbed, thus satisfying the condition outlined in the Bank’s forward guidance on its policy interest rate. The Governing Council therefore decided to end its extraordinary commitment to hold its policy rate at the effective lower bound. Looking ahead, the Governing Council expects interest rates will need to increase, with the timing and pace of those increases guided by the Bank’s commitment to achieving the 2% inflation target.


The Bank will keep its holdings of Government of Canada bonds on its balance sheet roughly constant at least until it begins to raise the policy interest rate. At that time, the Governing Council will consider exiting the reinvestment phase and reducing the size of its balance sheet by allowing roll-off of maturing Government of Canada bonds.


Information note


The next scheduled date for announcing the overnight rate target is March 2, 2022. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the Monetary Policy Report on April 13, 2022.


Wyatt Tunnicliffe

Mortgage Broker

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Credit and Mortgage Financing

By Wyatt Tunnicliffe • February 19, 2025
Credit. The ability of a customer to obtain goods or services before payment, based on the trust that you will make payments in the future. When you borrow money to buy a property, you’ll be required to prove that you have a good history of managing your credit. That is, making good on all your payments. But what exactly is a “good history of managing credit”? What are lenders looking at when they assess your credit report? If you’re new to managing your credit, an easy way to remember the minimum credit requirements for mortgage financing is the 2/2/2 rule. Two active trade lines established over a minimum period of two years, with a minimum limit of two thousand dollars, is what lenders are looking for. A trade line could be a credit card, an instalment loan, a car loan, or a line of credit; basically, anytime a lender extends credit to you. Your repayment history is kept on your credit report and generates a credit score. For a tradeline to be considered active, you must have used it for at least one month and then once every three months. To build a good credit history, both of your tradelines need to be used for at least two years. This history gives the lender confidence that you’ve established good credit habits over a decent length of time. Two thousand dollars is the bare minimum limit required on your trade lines. So if you have a credit card with a $1000 limit and a line of credit with a $2500 limit, you would be okay as your limit would be $3500. If you’re managing your credit well, chances are you will be offered a limit increase. It’s a good idea to take it. Mortgage Lenders want to know that you can handle borrowing money. Now, don’t confuse the limit with the balance. You don’t have to carry a balance on your trade lines for them to be considered active. To build credit, it’s best to use your tradelines but pay them off in full every month in the case of credit cards and make all your loan payments on time. A great way to use your credit is to pay your bills via direct withdrawal from your credit card, then set up a regular transfer from your bank account to pay off the credit card in full every month. Automation becomes your best friend. Just make sure you keep on top of your banking to ensure everything works as it should. Now, you might be thinking, what about my credit score, isn’t that important when talking about building a credit profile to secure a mortgage? Well, your credit score is important, but if you have two tradelines, reporting for two years, with a minimum limit of two thousand dollars, without missing any payments, your credit score will take care of itself, and you should have no worries. With that said, it never hurts to take a look at your credit every once and a while to ensure no errors are reported on your credit bureau. So, if you’re thinking about buying a property in the next couple of years and want to make sure that you have good enough credit to qualify, let’s talk. Connect anytime; it would be a pleasure to work with you and help you to understand better how your credit impacts mortgage qualification.

Purchase Plus Improvements

By Wyatt Tunnicliffe • February 12, 2025
The best place to start the mortgage process is with a pre-approval. But once you’ve been pre-approved for a mortgage and you’ve been shopping with location in mind, what happens when you can’t find a suitable property? There's no doubt about it; finding the perfect property within your price range is a difficult task, especially for first-time homebuyers. So, before buyer’s fatigue sets in, maybe you should consider adding the cost of renovations into your purchase. Buying a property and including the cost of renovations into the mortgage is available through a program called purchase plus improvements. When purchasing a home, you can add the cost of home upgrades into your mortgage, making it a great option if you can’t find something move-in ready and aren’t afraid to do a little work! But while this sounds simple enough, in all honestly, it’s quite the process. There are some pretty strict rules to follow, but nothing that you can’t handle with the guidance of an independent mortgage professional. Here’s a quick overview of the process. Firstly, you must provide quotes to the lender ahead of time for the work you would like to complete. It’s good to note that the renovations will have to increase the value of the property accordingly. From there, the lender doesn’t give you the money to do the upgrades; you have to come up with that yourself. However, once the work has been completed and verified by an appraiser, the lender will reimburse you and include the money in your mortgage. This program isn’t for everyone. Buying a home is a stressful endeavour in and of itself. The added stress of having to undertake renovations right away might not be a good idea. But then again, if you have the financial wherewithal to handle the cost of renovations and like the idea of making it yours from the start, then this might be just the option you’ve been looking for! Please connect directly; it would be a pleasure to walk through the exact process and outline what securing a purchase plus improvements would look like for you!
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