Bank of Canada Interest Rate Update - July 2023

The Bank of Canada met on July 12th and, in a widely anticipated move, increased interest rates by another 0.25%. Prime is now at the highest level we have seen in 22 years. With property values and mortgage sizes considerably higher than they were back then, this move has added further stress to all variable rate mortgage holders, and concern for those in fixed rate terms that are nearing renewal.

To read the full report on the July 12th announcement, please click HERE

There have been some positive numbers released lately, such as headline inflation coming in at 2.80% in the July report, down from its peak of 8.1% just 12 months ago. However, today's core inflation, a measure that the Bank of Canada (BoC) more closely monitors, is still sitting at 3.80%, so we still have a ways to go yet on our path to 2%. With the new data recently released, the BoC is now expecting that we will see inflation hovering around 3% for the next year and not coming back down to its 2% target range until more likely mid 2025.

As such, we are still expecting rates to remain elevated, with possibly more increases still to come, for the next 1-2 years while the Bank of Canada can monitor the impacts of the hikes and our inflationary data. The BoC has been clear that they will not be lowering rates until we have reached our 2% target, and once they do it will likely be a slow process to get our variable rates back down to a "normal" level. As such, my top recommendation continues to be that we must ensure your financial house is in order so that you are better able to weather this storm, and I am here to help you through this. Please do not wait to reach out to me until it’s too late. If you have any high interest debt or are struggling with your payments, I am here to help.

What does this rate announcement mean for you?    

If you have a fixed rate mortgage, nothing changes for you today. However, if you have a mortgage that is up for renewal in the next 6-12 months, we should definitely talk so that we can make a plan for the likely higher payment that you may face. 

If you are in a variable rate mortgage then your interest rate will increase by 0.25% and your next payment will likely be higher as well. How much higher? For every $100,000 your payment will increase by about $15 per month.

If you are in a "fixed payment - variable interest" product...    

And your payments have not yet changed, then you have likely hit or passed your "Trigger rate", and you may be nearing your "Trigger Point". It is important that you understand the consequences of this, so please reach out to me so that I can explain your specific situation and my recommendation for what to do. You have great options in this product, until you don't, so please don't wait until it's too late to reach out to me on my suggestions for what to do.

Should I lock-in my variable rate now?   

If locking-in to a fixed rate is something you are considering, let's talk. You may want to consider a 2 or 3 year fixed rate, which can offer you the fixed comfort today while still being able to renew at a time when rates are (hopefully) lower. 

I am personally still not locking-in my variable rate mortgages, as the current lock-in rates are too high for it to make sense for me, and I am willing to take the downside risk of rates potentially rising further in the near term for the upside potential that rates may drop sooner than expected. I would need to see a material drop in fixed rates before I would personally consider locking-in, and we are just not there yet. However, my budget can support the risk of staying variable, and every individual's situation is going to be different. If you have any concerns, please let me know and let's work together to brainstorm the right strategy for you.

Some of our lowest fixed rate options available today:

• 2 year fixed @ 5.99%

• 3 year fixed @ 5.84%

• 4 year fixed @ 5.39%

• 5 year fixed @ 5.29%

I want to lock-in to a fixed rate, what do I do now?    

Contact your lender directly and ask them what rate they will offer you to lock-in. Request all terms available to you, including 2 or 3 year rates if possible. Once you have that information if you would like our help, send it to me and I will help you with a strategy.  

Our team is here to support you for any and all your mortgage and real estate needs, we look forward to hearing from you.    

I hope you have a beautiful weekend!