In an interview with BNN Bloomberg the Bank of Canada’s Governor Tiff Macklem says “There’s a lot uncertainty around that scenario, but I think the message is pretty clear,” he said. “Interest rates are going to be very low for a long time.”

As expected, the Bank of Canada has maintained the target for the overnight rate at 1/4 percent (Bank of Canada press release). With most banks offering a discount of 30bp (0.30%) to their prime rate (generally target +220bp (2.20%), variable rates will remain in the vicinity of 2.15% or slightly lower until the Bank of Canada is confident that the economy has reached its pre-Covid19 level. It should be noted that certain economists were beginning to see economic weakening prior to situation caused by the global pandemic. Both Bank of Canada Governor Tiff Macklem and his predecessor made clear that 1/4 percent is as low as the target rate will go and that the Bank of Canada sees no benefit to creating negative interest rates by lowering the rate further.

For the real estate market, the low target, declining risk premiums in the bond market and a lack of inventory coming into the market will keep the housing market in the sellers favour. There maybe a brief period when inventory returns to the market, continued higher than usual unemployment and decreased immigration where the market slides into favour of the buyers but as the economy recovers the residential real estate market should return to pre-Covid19 position regardless of the massive government debts taken on to combat the economic effect of the pandemic.

For those still under financial stress due to job loss, diminished hours and financial uncertainty caused by the ongoing pandemic measures some relief has been extended by the a few of the major Canadian banks.

The Royal Bank of Canada and Toronto-Dominion Bank have each extended the deadline to apply for deferrals – payment pauses – on mortgages, credit cards, lines of credit and other loans until September 30th.

The Canadian Imperial Bank of Commerce will also approve new deferrals for clients who have yet to access the program until September 30th. According to CIBC spokesperson Trish Tervit, other relief could be available on a case by case basis.

According to spokespeople from the Bank of Montreal and National Bank, needs are being assessed on a case by case basis.

Canada’s banking regulator the Office of the Superintendent of Financial Institutions has some concern that the deferral programs are masking the potential for a wave of defaults. RBC and National Bank are reporting that the majority of borrowers who deferred are returning to full payment status.

If you are deferring, you do need to be aware that the interest for each months deferral will be added to the capital balance of your loan in some fashion and that the term of your loan is essentially extended by one month for each month you miss if you do not accelerate or lump sum the amount deferred in some manner. In finance there is no “free lunch”.

If your deferral is running out – or you want to defer for the first time, be proactive and contact your financial institution. There is a reason why you likely insured your loan with CMHC, Genworth or Canada Guaranty and your financial institution does not want you to default, they will help.