Mortgage Rate Update for June 2023 – The Bank of Canada ended its four-month rate increase pause on Wednesday, raising the overnight lending rate by 25 basis points (bp), or .25% to a 20-year high of 4.75%. In fact, you would have to go back to 2000 to experience rates that high!
This brought an end to speculation as to whether the Bank of Canada would continue the rate increase pause, which has been holding firm since the last rate increase on January, 25th, 2023. At that time, the Bank of Canada indicated that the rate hikes that had been going on since March of 2022 were at least for the foreseeable future, on hold. This Hamilton mortgage Broker anticipated that there would be another rate increase however not necessarily this soon. The hope was that the series of rate hikes over the better part of a year would “catch up” with inflation in the following months and bring inflation lower without further hikes.
Unfortunately, inflation proved to be more stubborn than anticipated, with a slight uptick in May, resulting in the Bank of Canada making the difficult decision to increase the Overnight Rate by 25 bps.
As anticipated all financial institutions also increased their Prime Rate by .25% to a current Prime of 6.95% which is at a level not seen in over 20 years.
For those with variable-rate mortgages and Lines of Credit, the effect will be immediate. At the same time, bond rates have crept up over the past couple of weeks, resulting in across-the-board increases for fixed mortgage rates as well.
Due to the gap between variable-rate mortgages and their fixed-rate counterparts, we are currently recommending that our clients consider fixed-rate mortgages with a 3-year term. This is an attractive option, as they offer considerably lower interest rates than a variable rate mortgage, providing both interest rate and payment relief. In addition, it also offers the flexibility of being able to reassess the rate environment in 3 years’ time. With any hope, by then interest rates will have started to decline, offering the possibility of renegotiating at a lower rate than what’s available today.
If you are currently in a variable rate mortgage or your mortgage is coming up for renewal make sure to contact your Hamilton mortgage broker to discuss your best mortgage options. You can also find out more information on the trigger rate or what this increase might mean for you in this blog article.