Despite earlier indications from the Bank of Canada back in January that they would be pausing further rate hikes, they just initiated their second hike since that time. The most recent 25 basis point increase on July 12th, adds to the previous 25 basis point hike, bringing the Bank of Canada overnight rate to 5%. This is a new 20-year high.
All lending institutions were quick to follow with increases to their Prime Lending Rates, with the majority increasing to 7.2%. This will have an immediate effect on anyone with variable-rate mortgages or lines of credit, increasing their interest costs.
At the same time, fixed-term mortgage rates have been steadily increasing over the past months and weeks, negatively affecting clients taking out new mortgages and renewal clients. While existing fixed-term mortgage clients will not be immediately affected, upcoming renewal rates could come as an unpleasant surprise. As a Grimsby Mortgage Broker, we are here to source the best mortgage rates whether for a new mortgage, or a renewal of your existing mortgage.
With these rate hikes directly targeting inflation, there was a shimmer of optimism with most recent inflation reports showing a slow but steady decrease, however, inflation still isn’t where the Bank of Canada wants it. In order for the Bank of Canada to cease further rate increases not only does inflation have to come down to the 2% range, but it also has to remain at that level for a duration that the Bank of Canada is confident that it will stay down. In order to begin decreasing rates, they have to be confident doing so won’t result in an uptick in inflation.
All recent communication and actions on the part of the Bank of Canada indicate that they are willing to err on the side of caution, so the chance of rates decreasing in the near future appears to be less and less likely.
As always, contact your Grimsby Mortgage Broker for the best advice on your specific mortgage situation.