There wasn’t any surprise here for most people following the news and speculation. As expected, the Bank of Canada has increased the policy rate another 25 basis points to 5.0%. This bumps the Bank Rate to 5.25% and the deposit rate at 5%.
“In light of the accumulation of evidence that excess demand and elevated core inflation are both proving more persistent, and taking into account its revised outlook for economic activity and inflation, Governing Council decided to increase the policy interest rate to 5%. Quantitative tightening is complementing the restrictive stance of monetary policy and normalizing the Bank’s balance sheet” -Bank of Canada
This means that the prime mortgage lending rate is now up to 7.2% (up from 6.95%) and it’s no surprise to see banks making things a bit tougher on borrowers. Since there has been two increases (+.5%) since June 7, 2023, some lenders appear to be worried about rate holds. Active buyers with rate holds should proactively check in with their mortgage specialist to make sure their preferred lender is honouring their hold.
What does another .25% increase mean for the typical consumer? That’s approximately an ADDITIONAL $15.50 increase for every $100,000 in your mortgage. So if you have a $750,000 mortgage, that’s another $116 per month in interest (not principle) payments. This also will have an obvious detrimental affect on your purchasing power.
In a recent interview, Bianca Myddleton, Broker/Owner of Coldwell Banker Marquise stated,
“This rate is burdensome on those with variable-rate mortgages, HELOCs, and lines of credit…Meanwhile, sales and home prices in Canada’s housing market have accelerated over 2023, which suggests that financial conditions have not been restrictive enough… I do find people that have rental properties are starting to sell them because the payments have increased, and, in B.C., one can only raise rent 2% per year. This is going to add to the shortage of rental properties.” -Bianca Myddleton
To read more of this interview and others from across Canada, please check out “Coldwell Banker Canada, Guiding Star Mortgage Experts Share Helpful Insights into Latest Bank of Canada Interest Rate Hike“, July 12, 2023.
The next scheduled rate announcement is September 6, 2023.