Bank of Canada Rate Announcement June 3rd, 2020
Victor Anasimiv • June 3, 2020
The Bank of Canada today maintained its target for the overnight rate at the effective lower bound of ¼ percent. The Bank Rate is correspondingly ½ percent and the deposit rate is ¼ percent.
Incoming data confirm the severe impact of the COVID-19 pandemic on the global economy. This impact appears to have peaked, although uncertainty about how the recovery will unfold remains high. Massive policy responses in advanced economies have helped to replace lost income and cushion the effect of economic shutdowns. Financial conditions have improved, and commodity prices have risen in recent weeks after falling sharply earlier this year. Because different countries’ containment measures will be lifted at different times, the global recovery likely will be protracted and uneven.
In Canada, the pandemic has led to historic losses in output and jobs. Still, the Canadian economy appears to have avoided the most severe scenario presented in the Bank’s April Monetary Policy Report (MPR). The level of real GDP in the first quarter was 2.1 percent lower than in the fourth quarter of 2019. This GDP reading is in the middle of the Bank’s April monitoring range and reflects the combined impact of falling oil prices and widespread shutdowns. The level of real GDP in the second quarter will likely show a further decline of 10-20 percent, as continued shutdowns and sharply lower investment in the energy sector take a further toll on output. Decisive and targeted fiscal actions, combined with lower interest rates, are buffering the impact of the shutdown on disposable income and helping to lay the foundation for economic recovery. While the outlook for the second half of 2020 and beyond remains heavily clouded, the Bank expects the economy to resume growth in the third quarter.
CPI inflation has decreased to near zero, as anticipated in the April MPR, mainly due to lower prices for gasoline. The Bank expects temporary factors to keep CPI inflation below the target band in the near term. The Bank’s core measures of inflation have drifted down, although by much less than the CPI, and are now between 1.6 and 2 percent.
The Bank’s programs to improve market function are having their intended effect. After significant strains in March, short-term funding conditions have improved. Therefore, the Bank is reducing the frequency of its term repo operations to once per week, and its program to purchase bankers’ acceptances to bi-weekly operations. The Bank stands ready to adjust these programs if market conditions warrant. Meanwhile, its other programs to purchase federal, provincial, and corporate debt are continuing at their present frequency and scope.
As market function improves and containment restrictions ease, the Bank’s focus will shift to supporting the resumption of growth in output and employment. The Bank maintains its commitment to continue large-scale asset purchases until the economic recovery is well underway. Any further policy actions would be calibrated to provide the necessary degree of monetary policy accommodation required to achieve the inflation target.
Information notes
Tiff Macklem assumes his role as the Bank’s tenth Governor today. He participated as an observer in Governing Council’s deliberations for this policy interest rate decision and endorses the rate decision and measures announced in this press release.
The next scheduled date for announcing the overnight rate target is July 15, 2020. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR at the same time.
If you're a homeowner aged 55 or older, you may have heard about reverse mortgages —and chances are, you've also heard a few myths that made you think twice. At CV Mortgage Group, we’re here to clear the air and help you understand the real facts behind reverse mortgages in Canada. Let’s break down some of the most common misconceptions and what’s actually true. Myth #1: “With a reverse mortgage, you no longer own your home.” Reality: You always retain ownership of your home. A reverse mortgage doesn’t take your home away. You stay on title and remain the legal owner, just like with a traditional mortgage. As long as you continue to meet your mortgage obligations—such as paying property taxes and maintaining the property—you stay in control. Myth #2: “You’ll owe more than your home is worth.” Reality: That’s not allowed in Canada. Thanks to the “no negative equity guarantee,” the amount you owe when your reverse mortgage is due will never exceed the fair market value of your home— as long as mortgage obligations are met. This federally mandated protection ensures that you or your estate are never left with a bill greater than your home's value. Myth #3: “Reverse mortgages are too expensive.” Reality: Reverse mortgages can actually be a cost-effective solution. Yes, you’ll need to cover appraisal costs, legal advice, and a closing fee—but when compared to the costs of downsizing, selling, or relocating , many homeowners find a reverse mortgage to be the more affordable and convenient choice. Myth #4: “Reverse mortgages have higher interest rates.” Reality: It depends on the situation. Reverse mortgage rates are generally higher than traditional mortgage rates, but they don’t require monthly payments . For retired Canadians who may not qualify for a conventional mortgage—or for whom fixed monthly payments are a financial burden—a reverse mortgage offers flexibility and freedom . Myth #5: “You can’t pass your home to your kids.” Reality: You absolutely can. When you pass away, your heirs can choose to repay the reverse mortgage and keep the property . And thanks to the no negative equity guarantee, they’ll never owe more than the home’s market value if all mortgage obligations were met. Still Have Questions About Reverse Mortgages? You're not alone. Reverse mortgages aren’t for everyone, but they can be a powerful tool for retirees who want to access their home equity without selling or moving. Let’s talk about whether a reverse mortgage is the right fit for your retirement goals. Contact us today for expert guidance you can trust.
If you’ve been thinking about buying a second property and you’re looking to put some of the pieces together, you’ve come to the right place! Whether you’re looking to buy a vacation property, start a rental portfolio, or help accommodate a family member, there are many reasons to buy a second property (while keeping your existing property), which might make sense for you! Now, while there are many great reasons to buy a second property, there is also a lot to know as you walk through the process. The key here is to have absolute clarity around your why. Ask yourself, why do you want to buy a second property? This isn’t a decision to be taken lightly or one that should be made too quickly. Buying a second property should be a strategic decision that allows you to accomplish your goals, and it should include an assessment of your overall financial health. So with clear goals in mind, the best place to start the process is to have a conversation with an independent mortgage professional. This will allow you to assess your financial situation, outline the costs, and put together a plan to make it happen. While purchasing a second property is similar to buying a primary residence, there are some key differences. Just because you’ve qualified in the past for your existing mortgage doesn’t mean you’ll qualify to purchase a second property. One key difference is the amount of downpayment you might be required to come up with. A property that is owner-occupied or occupied by a family member on a rent-free basis will require less of a downpayment than if the second property will be used to generate an income. So, depending on the property's intended use, you might have to come up with as much as 25%-35% down. This is where strategic planning comes in. Consider unlocking the equity in your existing home to finance the downpayment to purchase your second home. Here are a few ways you can go about doing that: Securing a new mortgage if you own your property clear title Refinancing your existing mortgage to access additional funds Securing a home equity line of credit (HELOC) Getting a second mortgage behind your existing first mortgage Securing a reverse mortgage The conversation about buying a second property should include assessing your overall financial health, leveraging your existing assets to lower your overall cost of borrowing, and figuring out the best way to accomplish your goals. And as it's impossible to outline every scenario in a simple blog post, if you’d like to discuss your goals and put a plan together to finance a second property, connect anytime. It would be a pleasure to work with you.
The idea of owning a vacation home—your own cozy escape from everyday life—is a dream many Canadians share. Whether it’s a lakeside cabin, a ski chalet, or a beachside bungalow, a second property can add lifestyle value, rental income, and long-term wealth. But before you jump into vacation home ownership, it’s important to think through the details—both financial and practical. Start With Your 5- and 10-Year Plan Before you get swept away by the perfect view or your dream destination, take a step back and ask yourself: Will you use it enough to justify the cost? Are there other financial goals that take priority right now? What’s the opportunity cost of tying up your money in a second home? Owning a vacation home can be incredibly rewarding, but it should fit comfortably within your long-term financial goals—not compete with them. Financing a Vacation Property: What to Consider If you don’t plan to pay cash, then financing your vacation home will be your next major step. Mortgage rules for second properties are more complex than those for your primary residence, so here’s what to think about: 1. Do You Have Enough for a Down Payment? Depending on the type of property and how you plan to use it, down payment requirements typically range from 5% to 20%+ . Factors like whether the property is winterized, the purchase price, and its location all come into play. 2. Can You Afford the Additional Debt? Lenders will calculate your Gross Debt Service (GDS) and Total Debt Service (TDS) ratios to assess whether you can take on a second mortgage. GDS: Should not exceed 39% of your income TDS: Should not exceed 44% If you’re not sure how to calculate these, that’s where I can help! 3. Is the Property Mortgage-Eligible? Remote or non-winterized properties, or those located outside of Canada, may not qualify for traditional mortgage financing. In these cases, we may need to look at creative lending solutions . 4. Owner-Occupied or Investment Property? Whether you’ll live in the home occasionally, rent it out, or use it strictly as an investment affects what type of financing you’ll need and what your tax implications might be. Location, Location… Logistics Choosing the right vacation property is more than just finding a beautiful setting. Consider: Current and future development in the area Available municipal services (sewer, water, road maintenance) Transportation access – how easy is it to get to your vacation home in all seasons? Resale value and long-term potential Seasonal access or weather challenges What Happens When You’re Not There? Unless you plan to live there full-time, you'll need to consider: Will you rent it out for extra income? Will you hire a property manager or rely on family/friends? What’s required to maintain valid home insurance while it’s vacant? Planning ahead will protect your investment and give you peace of mind while you’re away. Not Sure Where to Start? I’ve Got You Covered. Buying a vacation home is exciting—but it can also be complicated. As a mortgage broker, I can help you: Understand your financial readiness Calculate your GDS/TDS ratios Review down payment and lending requirements Explore creative solutions like second mortgages , reverse mortgages , or alternative lenders Whether you’re just starting to dream or ready to take action, let’s build a plan that gets you one step closer to your ideal getaway. Reach out today—it would be a pleasure to work with you.
