Bank of Canada Announcement

The Bank of Canada raised the rates by another 0.25% today (January 25, 2023). The prime rate is now 6.70% from 6.45%.  

Critical comments from BOC are as follows:

•   “With persistent excess demand putting continued upward pressure on many prices, Governing Council decided to increase the policy interest rate by a further 25 basis points.”
•   “If economic developments evolve broadly in line with the forecast we published today, we expect to hold the policy rate at its current level while we assess the impact of the cumulative 425-basis-point increase in our policy rate.”
•   “We have raised rates rapidly, and now it’s time to pause and assess whether monetary policy is sufficiently restrictive to bring inflation back to the 2% target.”

Please note the following essential information:

1. For every $100,000 variable rate mortgage payment will increase by approximately $15 per month
2. For every $100,000 HELOC (Home Equity Line of Credit), monthly interest-only payment will increase by approximately $21 per month
3. Markets expect the next BOC move to be a rate cut in October. However, let’s take that with a grain of salt since this depends if there are no other crazy economic or global anomalies that appear unexpectedly.  
4. Markets are projecting only a 10% chance of another 0.25% rate hike on March 8. The markets projected a 60% chance of the BOC hiking rates on January 25.

What does this mean for you?

If you have a fixed-rate mortgage, it is worth noting when your mortgage matures. If your mortgage matures within the next 13 months, please talk to us since we can protect you from rising interest rates for 13 months.

If you have a variable-rate mortgage, spend only 20% of your time focusing on the problem and 80% on the solution. This brings us to the next topic below regarding Cashflow. If this rate hike challenges your cash flow, please talk to us about possible strategies to alleviate the strain on your finances. 

If the rate hike is something you can handle, but you are concerned about future rate hikes or should you lock in, please reach out to us so we can talk about the best course of action. Please do not talk to your bank without consulting with us. We are your Mortgage & Money Strategists, after all.  Please book with us using this link.