![]() ![]() The BoC has hiked rates a total of 10 times between March 2022 and July 2023, to bring the benchmark cost of borrowing to 5%. Alternatively, when the pace of inflation falls below the BoC’s target, it cuts its overnight rate, to make it cheaper to borrow, thereby stimulating the economy. This leads to less consumption (less spending and borrowing), which in turn decreases the rate of inflation. Therefore, when the BoC raises its rate, it makes it more expensive for consumers and businesses to borrow money. This rate directly influences the Prime rate set by lenders, which in turn is used to set the price of variable mortgage rates and home equity lines of credit (HELOCs). This is because the central bank uses its overnight lending rate to influence lending and borrowing behaviour. This promising reading could pave the way for the Bank of Canada to resume a rate-hold stance in its September announcement and moving forward, following its last two consecutive rate hikes in July and June, where it raised its benchmark borrowing rate by a combined 0.5%. Read: June inflation comes in lower than expected at 2.8% On July 18, Statistics Canada reported that the Consumer Price Index ticked up by 2.8% year over year in June – a welcome decline from the 3.4 recorded in the previous month, and marking inflation’s return to the Bank of Canada’s target range of 1 - 3% for the first time in two years. In the near future, it seems that fixed rates will at best remain elevated, but could potentially rise as well. They are currently elevated, hovering around the 3.8% mark. However, if the Bank of Canada does feel the need to raise the Overnight Lending Rate again, variable rates will rise in turn.įixed mortgage rates, on the other hand, have been highly reactive in recent weeks, rising and falling along with new economic reports such as GDP, inflation numbers and the latest Bank of Canada rate hike. Should inflation trend downwards, mortgage shoppers can expect variable rates to remain relatively unchanged for the remainder of the year, provided the Bank of Canada stays the course. As well, the Bank made it clear that, should inflation fail to trend downwards in line with its expectations, further rate hikes in 2023 are very much on the table. The Bank released commentary accompanying the most recent announcement in July explaining that persistently high inflation figures coupled with unexpectedly strong GDP growth in the first quarter of 2023 were among the primary factors driving the latest rate hike. This year has been a mixed bag for the mortgage market. While borrowers and would-be home buyers enjoyed a few months of relative stability in the first few months of 2023, the Bank of Canada’s decision to raise its target for the overnight rate by 0.25% in both its June and July announcements has caused the cost of borrowing to rise once again. As of August 5, 2023, the best fixed mortgage rate is 5.19% and the best variable mortgage rate is 5.95%.īorrowers are likely wondering what’s in store for the rest of 2023 following last year’s volatility, which saw a 100% increase in the fixed cost of borrowing, and over 520% for variable rates. ![]()
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