This was written in September 2010, when rates were historically low.
Rates up 300% Since May 2010
As predicted by most Financial Pundits, the Bank of Canada key overnight rate jumped another 33% from its previous rate. Now, it is an astronomical 300% higher than what it was in May of 2010!
How can this be possible? Well, the rate went up 0.25% to 1.00% (from 0.75%) and remember in May, it was at 0.25%, but it is much more sensational to use the increased numbers.
Many folks in the know claim this may be the last increase until after Q1 2011. That is unless something drastic happens in the economy. For example, an inflationary tax is implemented (can you spell HST). The Bank of Canada's CPI Target of around 2.0% is still above the current rate (1.6% using their basket of goods), so in the Bank's estimation, inflation is still under control, so that is another reason that rates may not be going up much soon. Given how fragile the U.S. economy is proving, we may not see any more increases for the next little while, but remember, these low rates are still historically low, and now is the time to take advantage of them.
What do I mean by taking advantage of low rates? If you are in a variable rate debt class situation (like a line of credit or variable rate mortgage), now is the time to pay off your debt. The interest charges are low. You get more bang for your buck. You can pay more of your principal off. Did you think I was saying go out and buy things on credit? You don't read this blog much, do you?
📈 Bank of Canada Overnight Interest Rate (2005–2025)
🔍 Key Highlights:
- 2005–2007: Rates hovered around 2.75% to 4.50%, reflecting a stable economic period.
- 2008–2009: In response to the global financial crisis, the Bank of Canada slashed rates to a historic low of 0.25%.
- 2010–2018: Gradual increases brought rates up to 1.75% by late 2018.
- 2020: The COVID-19 pandemic prompted a rapid reduction back to 0.25% to support the economy.
- 2022–2023: To combat rising inflation, rates were increased sharply, reaching 5.00% by mid-2023.
- 2024–2025: As inflation pressures eased, the Bank began lowering rates, settling at 2.75% by April 2025.
For a detailed breakdown and the most recent data, you can visit the Bank of Canada's official Interest Rates page.
2010 Interest Rate Articles
- Interest Rates Going Nowhere For January 2010
- Bank of Canada: No Rate Hikes (March 2010)
- Interest Rates, What Did I tell You? April 2010
- June 2010 When Interest Rates Doubled or Rates Up 100%!
- Interest Rates Sky Rocket September 2010
- October 2010 Rates remained the same.
- December 2010 Money is still too loose
- January 2011 No Rate Change but Promises of BIG changes Coming
Those are still incredibly low interest rates. Even if they have gone up 300%.
Hello
Why do we have to pay the BOC rate PLUS the bank’s prime. This only adds to the cost of borrowing money. Why can we not deal directly with the BOC? Banks rip us off.
I agree, this is no time to panic and “lock-in” your mortgage rate (even though the 5 year is coming down). This should be the last of the consecutive rate hikes and we are still at historic lows. Take advantage, as you said, and pay down that mortgage & LOC.