The Bank of Canada has raised its policy rate by 0.5% as it continues its efforts to curb high inflation and rebalance demand and supply. This was an expected increase although experts were anticipating a larger rate hike of 0.75 %. The policy rate affects the cost of borrowing for various loans, including variable rate mortgages and lines of credit. 

The Canadian economy continues to operate in excess demand, as per the Bank’s announcement. The demand for goods and services remains higher than what the economy is able to supply which is contributing to high inflation.

While inflation has declined in the last three months from 8.1% to 6.9%, primarily due to a fall in gasoline prices, the Bank expects inflation to remain high for the near-term and move down to around 3% by the end of 2023. Given this projection, the Bank signalled that we should expect another policy rate increase at the next announcement which is scheduled for December 7th, 2022. I’ll make sure to keep you informed.

If you have any questions about your mortgage or your mortgage is coming up for renewal in 2023, reach out to a Mortgage Alliance Professional. They are here to help!