Ninety Years Of Canadian Interest Rates.

The Depression left Canada with no institution able to manage money and credit for the country as a whole. Parliament created one. It opened on 11 March 1935 and set its first Bank Rate — what it charges banks to borrow — at 2.5%.

The Bank opened in 1935 with private shareholders. Within three years Parliament had bought every one of them out, and from 1938 the Bank of Canada has had a single shareholder: the federal government. The rate itself did not move at all - 2.5% from the first day until 1944.

For a mortgageThe National Housing Act arrived the same year, the first federal framework for lending against a house.

Canada went to war and monetary policy was turned to paying for it. Foreign exchange controls came in that September, and the Bank held its rate at 2.5% so Ottawa could borrow cheaply for the war effort.

To hold down the cost of financing the war, the Bank cut its rate to 1.5% and gave the chartered banks more cash reserves than they had ever had, so they could keep buying government bonds. It was the lowest rate of the Bank's first 20 years.

For a mortgageWartime savings bonds paid about 3%. Mortgages were rationed by lenders, not shopped.

Central Mortgage and Housing Corporation began work on 1 January 1946, created to house returning veterans and to stand behind mortgage lending. The Bank's rate stayed at its wartime 1.5%, where it had been since 1944.

For a mortgageFederal insurance, amortization rules, a national market rather than a local one - most of what a Canadian mortgage is starts here.

Britain cut the pound by roughly 30% on 18 September 1949 and Canada followed the next day, taking the dollar from parity with the US dollar to about 91 cents. The Bank Rate did not move; the exchange rate did the adjusting instead.

The Korean War defence build-up landed on an economy already stretched by heavy investment and consumer spending, and prices climbed. The Bank raised its rate from 1.5% to 2% — the first increase in its 15-year history.

For a mortgageThe first postwar suburban buyers met the first rate increase the Bank ever made.

With the Korean War over, defence spending fell, growth stalled and inflation sat near zero. The Bank cut back to 1.5% and said the rate should now move more often, tracking short-term market rates more closely.

Growth came back strongly, led by an investment boom in natural resources, and bank lending expanded fast. The Bank raised its rate to 2%, starting a run of increases meant to slow the growth of credit.

Credit kept expanding and demand kept building. The Bank pushed its rate to 2.75%, the highest since it opened, and sold government bonds to drain cash from the banking system. Inflation reached 3% the following year.

The Bank stopped choosing the rate itself. From 1 November 1956 it was set each week at a quarter point above the yield on 91-day government treasury bills, so it moved with the market instead of by decision.

From 1956 to 1962 the Bank Rate floated a quarter point above the weekly treasury bill auction, so it fell with the market. The 1957-58 recession pushed it to 1.22% in July 1958 - the lowest it had ever been, and the lowest it would be until the emergency floor of 2009. That same summer Ottawa refinanced more than $6 billion of Victory Bonds in the largest debt operation in Canadian history.

Governor James Coyne kept forcing short-term rates up through 1959 even though inflation was near 2%, arguing Canada leaned too heavily on foreign capital. The Bank Rate reached its highest level of the floating years.

Governor James Coyne resigned on 13 July 1961 after a public fight with the Diefenbaker government about who had the last word on monetary policy. The answer was written into law in 1967: the government may direct the Bank, but only in writing and in public, and then it owns the decision.

Ottawa blamed tight money for unemployment above 7% and moved to declare the governor's job vacant. Coyne resigned on 13 July 1961. Louis Rasminsky took over on 24 July, insisting the government's power over the Bank be spelled out.

The dollar was pegged at 92.5 US cents in May 1962 and still fell. On 24 June Ottawa announced import surcharges, spending cuts and tighter money, plus US$1.05 billion of foreign credit. The Bank Rate went to 6% and was again set by the Bank.

Both economies were running hot - Vietnam spending in the United States, near-full employment at home - and the Bank moved up in steps, from 4.25% at the end of 1964 to 5.25% by March 1966. It was the highest rate since the 1962 exchange crisis.

Britain devalued the pound on 18 November 1967 and the speculation moved straight to the Canadian dollar. The Bank raised its rate a full point to 6%, back to the level it had touched in the 1962 exchange crisis.

For a mortgageThe Bank Act had been revised that year to lift the 6% ceiling on what a chartered bank could charge and to let banks write conventional mortgages. Rate moves now reached borrowers through a far wider set of lenders.

A run on the United States gold stock in March 1968 forced the world onto a two-tier gold market, and the Canadian dollar came under attack with it. The Bank Rate went to 7.5% - higher than it had ever been in the Bank's 33 years.

Consumer prices were rising 4 to 5% a year and wage settlements faster still, stoked by US spending on the Vietnam War. The Bank tightened hard through 1969, taking the Bank Rate to 8% — the highest since it opened in 1935.

For a mortgageFive-year mortgage rates crossed 9% and buyers started choosing shorter terms.

Money flooding in was pushing the dollar above its 92.5-cent peg and threatening the fight against inflation. On 31 May 1970 the government let the currency float, and the Bank cut the rate from 7.5% to 7% to discourage foreign borrowing.

Washington cut the US dollar's link to gold in August 1971 and put a 10% surcharge on imports, squeezing Canadian exporters. With the economy still slack, the Bank cut to 4.75% — a level it then held for 18 months.

Food and commodity prices were climbing well before the embargo. The Bank raised its rate five times between April and September 1973, from 4.75% to 7.25%. OPEC cut supply the following month and made all of it worse.

Oil prices tripled after the 1973 embargo and food prices rose 14.9% that year, pushing inflation to 7.8% and higher after. The Bank raised the Bank Rate to 9.25%, the highest since it opened in 1935, and held it there into the autumn.

For a mortgageAnyone who signed a five-year term in 1969 renewed several points higher.

Inflation had topped 10% and wage and price controls were coming. In a September 1975 speech the Bank said it would slow the growth of money in the economy a little more each year rather than all at once. The Bank Rate rose to 9%.

Wage and price controls had been running since October 1975 and measured inflation came down with them, so the Bank eased to 7.5%. It was the last quiet moment of the decade: from this month the rate climbed without a real pause until it reached 21% in August 1981.

For a mortgageAnyone who signed a five-year term here renewed in 1982, at more than double the rate.

The Canadian dollar fell hard through 1978 and the Bank raised its rate to 10.25% to slow the slide. It was the first time in the Bank's history that its rate had reached double digits, and it would not drop back below 10% for four years.

Iran's revolution sent oil prices soaring, and on 6 October 1979 the US central bank began driving its own rates sharply higher. To stop money leaving Canada and the dollar from sinking, the Bank Rate went from 12.25% to 14%.

For a mortgageRenewals moved from single digits into the teens inside a single term.

From 13 March 1980 the Bank stopped setting its rate by announcement and let it float, fixed each week a quarter of a point above the yield on federal 91-day treasury bills. Rates could now swing every single week.

Inflation was back above 10% and US rates surged toward 20%. The Bank Rate, which had fallen as low as 10.18% in July, jumped to 17.26% by the end of December. Mortgage costs climbed with it.

For a mortgageA mortgage renewing that winter could reset near 18%, with no way to lock ahead.

In the week of 12 August 1981 the Bank Rate reached 21.24%, the highest level ever recorded. Consumer prices rose 12.5% that year, and the Bank held its rate far above inflation to break it. Posted five-year mortgages went past 21%.

For a mortgagePosted five-year rates passed 21%. On a $100,000 mortgage that is roughly $1,800 a month.

The economy was shrinking and unemployment was heading toward 13%, yet the rate rose again to 16.59% in June 1982 as the Bank fought to steady the Canadian dollar and finish off inflation. It was the hardest stretch for borrowers.

For a mortgageHouseholds who bought in 1979 renewed into the worst mortgage rates in Canadian history.

The amount of money in the economy no longer moved in step with inflation, so in November 1982 the Bank stopped steering policy by a money-supply target after seven years and went back to judging conditions case by case.

The recession had drained demand out of the economy and inflation fell from 12.5% in 1981 to about 5.9% in 1983. The Bank Rate dropped to 9.27% in May 1983, less than half what it had been at the 1981 peak.

For a mortgageThe first renewals in years that came in lower than the term before.

American rates jumped in the summer of 1984 and the Canadian dollar fell with them. The Bank Rate reached 13.24% in July, its highest since 1982 - proof that breaking inflation in 1981 had not settled anything.

For a mortgageA five-year term signed in 1979 came up for renewal into this.

The Canadian dollar fell to a record low against the US dollar in the first days of February 1986. The Bank pushed its rate up by a point and a half inside a single month to stop it.

On 19 October 1987 the Toronto market fell about 11% in a day. Money rushed out of shares into short-term government debt, pushing those yields down. The Bank Rate, then tied to the weekly treasury-bill auction, fell from 9.57% to 8.26%.

New Governor John Crow used a January 1988 lecture in Edmonton to declare that the Bank's job was stable prices, full stop. It signalled years of tight money: borrowing costs would stay high until inflation, then near 5%, was beaten down.

Two years of tightening against roughly 5% inflation, a hot job market and a housing boom ended here, at the highest Bank Rate since 1982. A recession had already begun in March 1990, and mortgages renewing at these levels hurt.

For a mortgageBuyers from the 1980s boom renewed into double digits just as prices turned.

With the February 1991 budget, the Bank and Ottawa jointly set targets for bringing inflation down: 3% by end-1992, 2.5% by mid-1994 and 2% by end-1995. For the first time borrowers had a published number to judge the Bank against.

For a mortgageA published inflation target is why a lender can quote a five-year rate with confidence.

Inflation had fallen below the Bank's own target and the recovery from the recession was weak, so rates kept sliding. At 3.88% the Bank Rate was the lowest since July 1963, a brief window of very cheap mortgage money.

For a mortgageBriefly the cheapest mortgage money in three decades. It did not last the year.

From mid-1994 the Bank aimed to keep the overnight rate, what banks charge each other for one-day loans, inside a half-point band. Rates had already jumped since January as U.S. rates rose and worries about Canada's debt grew.

Mexico's currency collapse, rising U.S. rates and alarm over Canadian government debt drove the dollar down and short-term rates up. The Bank raised its overnight target repeatedly to calm markets; the Bank Rate peaked near 8.5%.

For a mortgageVariable-rate holders felt this within weeks. Fixed-rate holders felt it at renewal.

Before the 30 October Quebec referendum, investors demanded more to hold Canadian short-term debt. Because the Bank Rate still floated a quarter-point above the weekly treasury-bill auction, it jumped to 7.65% from 6.71% a month earlier.

From 22 February 1996 the Bank set the Bank Rate at the top of a half-point band it wanted overnight lending to trade within, replacing a formula tied to treasury-bill auctions. Its intentions became far easier to read.

Inflation was inside the target band and Ottawa's deficit was closing. The Bank cut through 1996 until its rate reached 3% in November, the lowest since 1961 - and the start of the long descent in Canadian borrowing costs.

For a mortgageA term signed in November 1991 came off a 7.69% policy rate and renewed into 3%.

Crises in Asia and Russia pushed down prices for the commodities Canada exports, and the dollar fell with them. The Bank raised the Bank Rate a full point to 6% to restore confidence, judging the currency slide had loosened conditions too far.

The Bank began announcing rate decisions only on eight pre-set dates a year, starting 5 December 2000, when it held the overnight target at 5.75%. Borrowers and lenders could now know in advance when the rate might change.

The American economy was slowing sharply as the dot-com boom unwound, clouding the outlook for Canadian growth and inflation. The Bank cut the Bank Rate a quarter point, taking the overnight target to 5.50% and starting a year of rapid cuts.

Six days after the attacks in the United States, the Bank cut a half point to 3.50% outside its normal schedule, saying prompt action was needed to underpin confidence and support growth. More cuts followed into January 2002.

For a mortgageRate holds taken out that autumn were worth real money by the time buyers closed.

Growth in the first half of 2004 beat expectations, the economy was running close to full capacity, and oil prices were holding inflation above forecast. The Bank began withdrawing stimulus, raising the overnight target to 2.25%.

Growth and inflation in the first half of 2007 ran hotter than the Bank had forecast in April, so it raised the overnight target a quarter point to 4.50%. That turned out to be the high point of the cycle; the next move was down.

Losses on US subprime mortgages had raised bank funding costs worldwide and tightened credit in Canada, while the American housing slump threatened demand for Canadian exports. The Bank cut the overnight target to 4.25%.

As the financial crisis intensified, the Bank cut to 2.50% on the same day as the US Federal Reserve, the European Central Bank, the Bank of England, Sweden's Riksbank and the Swiss National Bank — a rare coordinated move.

For a mortgageVariable rates repriced almost immediately; fixed rates followed the bond market down.

The global recession had deepened and credit had dried up. The Bank cut to what it called the effective lower bound, and promised to stay there until mid-2010 as long as inflation stayed on track.

For a mortgageThe beginning of the cheapest decade for Canadian mortgages on record.

Canada bounced back quickly. The economy grew at a 6.1% annual pace in the first quarter on housing and consumer spending, and jobs were returning, so the Bank started withdrawing emergency stimulus.

A third straight hike took the rate to 1%. But the U.S. recovery was fading and Canada still had plenty of unused capacity, so the Bank stopped there. The rate then sat at 1% for more than four years.

The rate sat at 1% from September 2010 to January 2015. With it parked, the tightening was done through mortgage rules instead: in June 2012 Ottawa cut the maximum amortization on an insured mortgage from 30 years to 25, and OSFI issued its B-20 underwriting guideline the same month.

For a mortgageQualifying got harder while the rate stood still. It is the pattern that produced the stress test five years later.

Oil prices had collapsed, hitting incomes, jobs and investment in the energy sector. The unexpected cut was described by the Bank as insurance against that damage spreading to the rest of the economy.

For a mortgagePrime fell, but most lenders passed only part of the cut to variable-rate holders.

Energy firms cut spending again and non-energy exports came in weaker than hoped, leaving more idle capacity than the Bank expected. It added more stimulus to push inflation back toward 2%.

Growth was running faster than the economy could sustain, employment and wages were rising, and slack was being used up. The Bank judged soft inflation temporary and began removing stimulus.

The economy was running near full capacity, the U.S. was strong, and the new USMCA trade deal lifted a cloud over business investment. This proved to be the last hike of the cycle.

COVID-19 was spreading fast and oil prices were sliding. The Bank called the virus a material negative shock, with supply chains disrupted and confidence expected to fall, and cut by half a point to 1.25%.

For a mortgageVariable rates hit the lowest levels ever seen in Canada.

Inflation had reached 5.1%, price increases were spreading across the economy, and the slack left by the pandemic was gone. Russia's invasion of Ukraine was pushing energy and food prices higher still.

For a mortgageVariable-rate holders felt each of the next eight decisions in their payment.

Inflation was near 8% and expected to stay there. More than half of consumer price items were rising over 5%, and households and businesses were starting to expect high inflation to last, so the Bank moved a full point at once.

For a mortgageMany variable-payment mortgages hit their trigger rate, where the payment stops covering interest.

Demand and underlying inflation were proving stickier than expected, with businesses still raising prices unusually often. The Bank feared progress toward 2% would stall. This 5% peak then held for about 11 months across six straight decisions.

For a mortgageAnyone renewing a 2018 or 2020 term faced several hundred dollars a month more.

Inflation had eased to 2.7% and the Bank's core measures were falling too. With price pressures cooling, it judged that policy no longer needed to be as restrictive, and began the easing cycle.

For a mortgageThe first renewal relief in over four years, though pandemic-era terms still reset higher.

Inflation dropped to 1.6% in September, below the 2% target. After three quarter-point cuts, the Bank doubled the pace to half a point to support growth and keep inflation from drifting too low.

A second half-point cut: inflation was around 2%, the economy had more supply than demand, unemployment had risen to 6.8%, and the prospect of new US tariffs was clouding the outlook.

US tariffs and the constant threat of more were holding back consumer spending and business investment. The Bank cut to cushion the hit, warning that monetary policy cannot offset a trade war, then held at 2.75% for six months.

After six months on hold, the Bank cut again. GDP had fallen about 1.5% in the second quarter, employment had declined two months running, and the unemployment rate had climbed to 7.1% in August.

A weak economy and inflation near 2% justified one more cut. The Bank said this level was about right to keep inflation on target while helping the economy, and it has not moved the rate since.

For a mortgageThe level five-year fixed pricing has been built around ever since.

The rate has sat at 2.25% since October 2025. Headline inflation is near 3% on higher gasoline prices, but core inflation is close to 2%, unemployment eased to 6.4% in July, and the economy grew 3.3% in the second quarter.

For a mortgageRenewals from the 2021 lows are still resetting higher, even at 2.25%.