The Bank of Canada raised its key lending rate by 75 basis points this morning, bringing it to 3.25%. In its statement, the Bank said, “short-term inflation expectations remain high” and that inflation risks becoming “entrenched” the longer it remains elevated. As a result, the Bank says interest rates “will need to rise further.” "As the effects of tighter monetary policy work through the economy, we will be assessing how much higher interest rates need to go to return inflation to target,” it added. What happens now? In the coming days, banks and other financial institutions are expected to follow the Bank of Canada’s lead and hike their prime lending rate, which is used to price variable-rate mortgages and personal and home equity lines of credit (HELOCs). Fixed-rate mortgage holders will see no change to their rates.
Looking ahead - The Bank expects the Canadian economy to “moderate” in the last half of 2022 as global demand weakens and tighter monetary policy begins to bring demand more in line with supply. October 26, 2022 is the BoC’s next policy announcement date at which time it will also make its fourth Monetary Policy Report of the year available for review.
If you have any concerns about this rise in borrowing costs, I encourage you to reach out so we can discuss your personal situation and options.