Bank of Canada overnight rate rises by 100 basis points to 2.50%Synergy Mortgage
Invis – July 13, 2022
The Bank of Canada has raised its policy rate for the fourth consecutive time in 2022, bringing it to 2.50% from a pandemic low of 0.25%. The Bank has stated borrowing costs need to rise quickly to more normal levels to bring inflation back to a target of 2% from its current high of 7.7%. Raising interest rates is a move intended to force Canadians to spend more on interest repayments as opposed to spending on goods and services, thereby reducing demand and lowering inflation. We should expect more rate hikes from the Bank of Canada throughout 2022 with the overnight rate potentially climbing as high as 3.25% by year-end to cool domestic inflation and bring the economy back to balance without triggering too severe a recession or stagflation.
According to most Canadian economists, a historic labour squeeze, soaring food and energy prices, and rising interest rates with Canadian households carrying high amounts of debt are pressures that will push the economy into a mild and short recession in 2023.
Senior economist Stephen Brown of Capital Economics says, “The extent to how deep the recession could be will depend on how much house prices fall. The 20% drop in house prices that we forecasted over the next 18 months looks sizeable, but it would still leave prices 20% higher than before the pandemic. In that scenario, we think any recession would be relatively moderate”.
The next rate-setting day is September 7, 2022.
Now is the time to get in touch for a review of your mortgage strategy. It’s important to get advice and a professional assessment of your situation if you want to switch your mortgage for a new rate, need a new mortgage, are renewing, or looking to refinance for debt consolidation, renovations, or other large expenditures.
We regularly receive short-term rate promotions that are not posted online, which means our rates change frequently. Please contact us for these unpublished rate specials.