June 7, 2023

Mortgage Monitor –  Navigating the Latest Canadian Mortgage Rate Hike: What It Means for You

Mortgage Monitor –  Navigating the Latest Canadian Mortgage Rate Hike: What It Means for You

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Bank of Canada ends pause on hikes, raises policy rate by 25 basis points  — and there may be more to come.

The Canadian real estate market is in a state of flux once more, as the Bank of Canada announced a 25 basis point increase in its overnight rate earlier today, raising it to 4.75%. This is a notable jump, marking the first increase since January and bringing the key interest rate to its highest point since April 2001.

The Bank of Canada states that current interest rates are insufficient to balance the economy and achieve a two per cent inflation target.

In light of this development, many Canadian homeowners and prospective buyers might be wondering about the impact on mortgage rates and what this means for the housing market as a whole. Let’s explore.

What Triggered the Rate Hike?

A combination of factors have led the Bank of Canada to this decision. In the first quarter, Canada’s Gross Domestic Product (GDP) surpassed predictions, growing by an impressive 3.1%. This upward trend extended to the housing market as well, with activity picking up once more.

Consumer spending has been stronger than anticipated, reflecting a rebound in economic demand. The labour market remains tight, hinting at a robust economy. Meanwhile, inflation crept up to 4.4% in April, the first increase in 10 months. While the Bank expects it to come down to around 3% by summer, there’s a lingering worry that inflation might stick above the 2% target.

What Does This Mean for Mortgage Rates?

Mortgage rates are directly influenced by the key interest rate set by the Bank of Canada. Therefore, with this hike, we can expect an increase in mortgage rates across the country. This may affect both new mortgage applicants and those with variable-rate mortgages. If you are looking to renew your mortgage or purchase a new property it may make sense to speak with a mortgage broker to evaluate your options and get the best possible rates. 

Looking Ahead

In the coming months, the Bank of Canada will mainly focus on inflation expectations, wage growth, corporate pricing, and excess demand, aiming to align these with the inflation target. The next scheduled rate announcement will be on July 12, 2023.

While it’s natural to feel anxious and hesitant about what this rate hike means for the Canadian economy and your own cost of living, it’s important to remember that such fluctuations are a part of any economic cycle. As always, we at Everything Mortgages are committed to keeping you informed and providing guidance to navigate these changes effectively.

Stay tuned to our blog for the latest news, insights, and advice on navigating the Canadian mortgage landscape. And, as always, if you have any questions, don’t hesitate to reach out to our team of experts.

At Everything Mortgages we are a team of licensed experts who are ready to help find the mortgage solution that’s right for you. What drives our motivation to succeed is not the loan we secure but the difference we make. Whether it’s helping the first-time home buyer purchase their first home, the small business owner looking for a better solution or the hardworking professional break free from high-interest debt, we work hard to help you become mortgage-free sooner and build wealth creation faster.

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