On July 13,2022 the Bank of Canada increased the overnight lending rate by a full 1% which is causing some concern with homeowners and buyers as to what to expect with interest rates moving forward. Any changes to the overnight rate result in an increase to the Prime lending rate which has risen from 2.45% to 4.7% since the beginning of 2022.
Our Chief economist at Dominion Lending Center, Dr Sherry Cooper addresses these concerns and provides some insight
There will be some time to see the full impact of the policy for interest rate hikes. The Bank of Canada adjustments impact the Prime lending rate which sets pricing for variable rate mortgages and lines of credit.
Pricing for the fixed mortgages products are set by the bond yield. So their rates can shift differently and not necessarily at the same time as the Prime rate. It is important for consumers to know they are not the same and how it impacts their specific mortgage. Always consult your independent mortgage broker to review your situation and set a plan for your mortgage.
While the current narrative about interest rates and inflation point towards a bumpy road in 2022 and 2023. There are some economists suggesting we may see the increases to the Bank of Canada overnight rate overshoot the mark and the the reset of inflation occur sooner than expected. In addition the short term fixed rates may rise and the longer term 5 year rates may adjust and drop a bit in 2023. These changes could impact real estate pricing and decisions by homeowners and home buyers.
Regardless of how this actually plays out in the next 12-18 months, the cost of housing is a major component of the personal budget and time well spent to look at options to save money and protect your family. This is not a time to react. It is a time to consult with your trusted advisors as to what to expect with interest rates and how they will effect you.
There are strategies to help during this time. Feel free to reach out to me anytime to set an appointment for a call by phone or Zoom.