Jon Jilani, Content Strategist
The Bank of Canada today announced that it will make no change to the target overnight rate, which currently stands at 0.25%. In its announcement, the Bank struck a positive tone, noting the effectiveness of vaccines, strong Canadian and global GDP growth and ongoing recovery and job growth in some of the worst affected sectors of the economy. Although it noted the high inflation rate, the Bank continues forecasting that inflation will come back in line by the end of 2022.
Let us help you determine which rate best suits your individual needs by answering a few short questions about your home and financial history.
Rising rates ahead and what this means for you
The Bank remains committed to keeping the target overnight rate steady until “the middle quarters of 2022,” which means you could see a rate hike one quarter sooner than previously forecasted. Positive economic news is generally bad news for mortgage rates, as it makes them rise. If the recovery continues as expected, you should expect multiple Bank of Canada rate hikes in the last three quarters of 2022. Anyone with a variable rate should recalculate their mortgage payment using various increased rate scenarios to ensure they are ready for the anticipated rate hikes. You can think of this as running a mortgage stress test for yourself. If you need help, you can always contact one of our agents at CanWise who can go through different mortgage scenarios with you to make sure that you’re prepared.
Fixed rate or variable rate - what to choose?
While a fixed rate mortgage is the right choice for anyone risk-averse, households that can handle more risk shouldn’t rule out a variable rate mortgage. Even in this rising rate environment, the Bank of Canada would need to hike rates 4 to 6 more times before today’s variable rate would be equal to today’s fixed rate. To help you make the decision of a fixed rate versus a variable rate, you can read more about the pros and cons of fixed versus variable mortgage rates on our site.
Time to get pre-approved!
Consumers should expect fixed rate increases this week and a steadily increasing fixed rate environment between now and the end of 2022. Anyone shopping for a home who is interested in a fixed rate should check Ratehub.ca frequently to ensure they get the best available rate. You should also get pre-approved right away so that you can hold today’s rates for 120 days. With a pre-approval, you can still get a lower rate if rates go down. However, if rates go up, the rate you were pre-approved for is protected.