Bank of Canada interest rate decision

The Bank of Canada announces its policy rate on eight scheduled dates a year. When it moves, the big banks usually adjust their prime rate within a day, and in recent years prime has stayed 2.20 percentage points above the policy rate. What that means for you depends on the kind of borrowing you have.

Adjustable-rate (variable payment) mortgages

Your rate is prime plus or minus your discount, so your payment changes soon after prime does, in either direction.

Fixed-payment variable mortgages

Your payment stays the same, but the split between interest and principal shifts. After a hike, less of each payment reduces your balance. If rates rise far enough, you can reach a trigger rate, where the payment only covers the interest and your lender will ask you to adjust.

Fixed-rate mortgages

Your rate and payment are locked until the end of your term, so a decision doesn’t change them. It can still shape the rate you’ll be offered at renewal. New fixed rates follow Government of Canada bond yields more than the policy rate itself.

HELOCs and other prime-based borrowing

Home equity lines of credit are priced off prime, so their rate moves with every decision.

Before the next announcement

If you’re buying, a pre-approval with a rate hold protects you if rates rise before you close. If you’re renewing within the next few months, many lenders will hold a rate about 120 days ahead, so you don’t have to guess the decision. Remember that qualifying still uses the stress test, the greater of your contract rate plus 2% or 5.25%, whichever way the Bank moves.