1.99% mortgage as BoC slashes rate
April 1, 2020
HSBC began offering a 1.99 per cent three-year term mortgage as of March 27 after the Bank of Canada (BoC) slashed its benchmark interest rate to 0.25 per cent amid the COVID-19 pandemic.
The overnight lending rate is what the bank charges for short-term loans between retail banks, but it impacts the rates that Canadian consumers get from their banks on things like savings accounts and variable rate loans.
On March 27, five-year mortgage rates—used by more than six out of every 10 mortgage holders in Canada—were at 2.6 per cent at the Bank of Montreal, and 2.94 per cent at TD, CIBC and Scotiabank.
"The pandemic-driven contraction has prompted decisive fiscal policy action in Canada to support individuals and businesses and to minimize any permanent damage to the structure of the economy," BoC said in a March 27 statement.
Prior to the cut, Canada had the highest central bank rate in the developed world at 0.75 per cent.
"The intent of our decision today is to support the financial system in its central role of providing credit in the economy, and to lay the foundation for the economy's return to normalcy," said Stephen Poloz, BoC governor.
Royce Mendes, an economist with CIBC, said "the Bank of Canada joined the string of central banks throwing the kitchen sink at the economy."
"While central bank stimulus can't bring the economy back to life on its own, the Bank of Canada's actions will help alleviate some of the pain and support the recovery, whenever that begins," Mendes said.
Poloz said the bank is willing to use any tools at its disposal to help stabilize a Canadian economy that has been waylaid by COVID-19.
"A firefighter has never been criticized for using too much water," Poloz said.