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.