Bank of Canada Raises Rates Again

Bank of Canada Raises Rates Again

I feel like it was just yesterday when the Bank of Canada announced its most recent rate hike… unfortunately, yesterday marks the announcement of yet another one. Canadian consumers and businesses are struggling. For the 7th time this year, the bank has raised its policy rate again, in an attempt to curb inflation. In the process, the bank has taken its rate from functionally zero to its highest point since 2008 — its fastest pace of rate hikes since inflation targeting began in the 1990s. 

The Bank of Canada raised its benchmark interest rate by 50 basis points, to 4.25%, though widely expected by economists who were expecting a hike of 25 of 50 points. The prime lending rate at all of Canada's major lenders will now be 6.45% as of this morning. So what does this mean for you? This will increase borrowing costs for anyone with a variable rate loan but if you are on a fixed rate loan, you will remain unaffected.

In previous rate hikes this year, the bank made it clear that it would continue to raise its trend-setting rate until inflation came back down. But when will that happen? In its statement on Wednesday, the bank says it "will be considering" whether or not the rate has to go higher in order to bring supply and demand back into balance and return inflation to target.

Economists are predicting one final increase of 25 basis points in January, but the Bank is very close to the end of its tightening cycle. Once the bank changes direction and has to cut its rate in 2023, speculations are suggesting that the housing market will pick up again as the cost of housing begins to slowly increase.

This might be your last opportunity for you to take advantage of the low housing prices before home prices start increasing again. I hope you found this information useful! As a realtor specializing in the Liberty Village and Toronto real estate market, I am here to help guide you through the entire buying or selling process. Grab a copy of my FREE Toronto guide by reaching out to me on the Contact page or on my social media. Look forward to speaking with you!