The Bank Of Canada announced this morning to keep their key overnight rate of 4.5%. As the Bank is still waiting to assess the impact of its previous eight consecutive rate hikes.

Previous Bank of Canada announcement also decided to keep the current interest rate. But It was threatened that it was conditional, making it clear that they will be ready to raise interest rates further if inflation doesn’t come down quickly enough.

Most forecasters expected the Bank to leave its key lending rate at 4.5% this Wednesday morning. Investors seem to agree, with trading on the overnight swaps market indicating less than a 10% chance of a change. But CIBC chief economist Avery Shenfeld says the bank may add cautionary language to its announcement that it could restart its inflation-fighting rate hikes again.

The Bank of Canada says they expect the annual inflation rate to fall to around 2-3% by mid-year. However, the poll suggests that inflation is still running at 5.2%, well over twice the BoC’s 2% target.

In March, the BoC became the first major central bank to stop its aggressive hiking cycle and is currently on a conditional pause. A majority of forecasters in the Reuters poll, 23 out of 31, believe that the rate will remain unchanged for the rest of 2023.

The BoC Deputy Governor Toni Gravelle said the Canadian banking system had a well-earned international reputation for stability, suggesting that policymakers are more focused on inflation and how the economy is performing.

Have questions about today’s announcement? Don’t hesitate to contact us at the office at 604-552-6190. Or you can CLICK HERE to book a quick call to review your mortgage!

Trish & The Primex Team 

Earlier this year we expected a .25% increase at the January announcement and saw exactly that. This next rate announcement is expected to not increase or decrease. After 8 consecutive rate hikes over the past year, the Bank of Canada is expected to leave rates unchanged. The Governing Council expects to hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases.

This morning, March 8th, it was announced exactly what was widely expected by economists. They have decided to hold the rate at 4.5% for the first time in a year, while reiterating its wait-and-see approach. The Bank of Canada says it still expects the annual inflation rate to fall to around 2-3% by mid-year.

Which leads economists to question what is going to happen after the March announcement.

“The U.S. Federal Reserve is probably going to be tightening at least two more times, if not more. For the Bank of Canada, if inflation remains sticky and if the economy does not break down, are they going to be able to sit there with the policy rates they have and pause as they suggested?” said Robert Kavcic, director and senior economist at BMO Capital Markets.

Since March of last year, the bank has raised its rate from near- 0% to 4.5%, the highest it’s been since 2007. Making it the fastest rate tightening cycle in its history, in hopes of tamping down on inflation. Although they announced this pause in rate hikes, they stressed it was conditional, making it clear that they will be ready to raise interest rates further if inflation doesn’t come down quickly enough.

“They wouldn’t want to announce a pause and then immediately not go through with (it),” said Karyne Charbonneau, CIBC’s executive director of economics.

Most recent inflation data suggests that the country is inching closer to normal price growth. Canada’s annual inflation rate slowed to 5.9% in January, down from its peak of 8.1% it reached last summer. With interest rates now at a 16-year high, most economists anticipate a mild recession sometime this year.

The market is a little volatile so our advice is that anyone shopping for a home currently, should get a pre-approval to hold today’s rate for up to 120 days. This will allow you to secure today’s rate, and if rates were to drop any further, you will still be eligible for lower interest rates. Don’t hesitate to reach out to us at Primex if you have any questions or concerns regarding your mortgage.

Trish & The Primex Team

The Bank of Canada was expected to raise rates another .25% higher, and that is exactly what was announced this morning. The policy rate is now 4.50%, the highest rate since 2007. Which is the bank’s 8th consecutive rate hike in the past year, but the smallest one yet.

Some have predicted that for the year of 2023 the rates will continue to trend upward, but the Bank of Canada stated today that this could be the peak for this current tightening cycle as inflation is expected to “decline significantly” in the upcoming months. For Canadians, this means an extra $15.67 added to your mortgage payment for every $100,000 in mortgage. 

“We’ve raised rates rapidly, and now it’s time to pause and assess whether monetary policy is sufficiently restrictive to bring inflation back to its two per cent target,” Bank of Canada Governor Tiff Macklem told reporters after the rate announcement.

As of this January, there is an agreement between the big banks that in 2023 a recession will happen in Canada. Although economists are saying that this recession would likely be mild to moderate in comparison to previous recessions.

The banks have a real-time view of cardholder spending data and are well-positioned to report on economic trends sooner, and what we are learning is that spending is decreasing significantly due to higher costs throughout the economy and with higher interest rate expenses, we are at the point of an overall economic slowdown. But with lower spending comes a slowing economy and lower inflation, and eventually, lower mortgage interest rates.

At this time of higher rates, there is no good low rate to lock into. With this said, a calculated approach should be considered to position yourself to take advantage of lower rates once they begin to fall. Therefore a shorter term on your mortgage such as a 3 year fixed rate, could position you better to renew into a lower fixed rate in 3 years’ time. The typical 5 year term may be too long for a higher rate.

But for those with a higher tolerance to risk, a variable rate may be worth considering. Given over 40 years of rate data, as seen in a York University study on Canadian interest rates, the variable rate is likely to lead to more significant savings over years. As soon as the rate begins to fall, as predicted to in late 2023 or early 2024, the variable rate holder will benefit immediately. This ‘lower rate sooner’ potential could lead to more savings than locking in even a shorter term fixed rate. But with variable rates higher currently and another 0.25% increase announced today, it will take a strong willed person in 2023 to realize these savings over the next few years.

Have any more questions about what this means for you and your family? Don’t hesitate to reach out to us at Primex Mortgages, we would be more than happy to chat!

Trish & The Primex Team