The Bank of Canada raised its benchmark interest rate to 4.5%.

The Bank of Canada has raised its benchmark interest rate for the eighth time to 4.5%.  Mortgage lenders and banks have followed suit, increasing their prime rate to 6.7% (TD at 6.85%).

Economists widely expected the move as the bank continues to combat record-high inflation. The hike this time was only ¼ of a percent, making it the smallest hike since March 2022, and thus a sign that the bank may be done with hiking rates for the next little while.

Tiff Macklem, Governor of the Bank of Canada, said at the news conference following the announcement, ‘With today’s modest increase, we expect to pause rate hikes while we assess the impacts of the substantial monetary policy tightening already undertaken.’  However, he also indicated that if they need to do more to get inflation to the two-percent target, they will.

This rate hike will add about $15 per $100,000 to a variable-rate monthly mortgage payment.  If the central bank is indeed finished hiking rates, it’s not a moment too soon.

Most people, including myself, are still holding firm with their variable-rate mortgages, hoping to take advantage of interest savings when rates come down. If you are looking to lock in at this time, fixed rates are in the 4.5-5.5% mark, depending on the type of mortgage you hold and the lender you are with.

Based on the smaller hike, and the newest information from the Bank of Canada, we predict that rates should start to come down and trend downward over the next 18 months. If you are in a variable-rate mortgage, you should be heading toward better interest rates in the not-too-distant future. How soon it will start and how low it will go, we don’t know. If you need help making a decision that is right for you, please reach out.