Bank of Canada policy rate on hold for now
The Bank of Canada raised its policy overnight rate from 0.25% to 5.00% in July to combat high inflation, but at its September 6th policy meeting it decided to leave the rate unchanged.
The next rate announcement is October 25th.
As mortgage rates rise, they reduce homebuying budgets. Low mortgage rates correlate with real estate price growth, and rising rates coincide with price cooling.
The Bank of Canada is in the process of “Quantitative Tightening,” as a result, fixed mortgage rates have been rising and are expected to rise further.
A fixed mortgage rate provides peace of mind, but it does come with some risks that many people aren’t aware of. Locking in a 5-year fixed mortgage rate will only benefit you financially if variable rates continue to climb.
Variable rates are expected to remain above 6 per cent well into 2024. At the moment, a fixed 3-year or 5-year mortgage is likely the most prudent choice. If inflation and house prices continue to rise, then the Bank of Canada could raise rates. The Bank interferes in markets to push rates below the level the free market would set.
