The Bank of Canada announced on July 12th they will be raising the key interest rate by 25 basis points. This raise is this third this year as the Bank of Canada continues to evaluate the effect of continued rate hikes on inflation. The last rate increase from the Bank of Canada came in May which brought the key rate to 4.75%.

The current overnight rate now sits at 5.00%.

Key Takeaways

  • Bank of Canada announced a 0.25% rate hike in July, with the next rate announcement coming in September.
  • We predict fixed rates will increase in July, with variable rates remaining steady.
  • Today’s best mortgage rates are 4.97% for 5-year fixed and 5.85% on 5-year variable

How will the latest Bank of Canada interest rate announcement affect mortgage rates?

In our latest Mortgage Rate Outlook, we predicted that fixed rates would increase slightly and variable rates may increase following a potential rate hike. To view the latest mortgage rates updated daily from banks and mortgage brokers, bookmark our rates page.

As of today, variable mortgage rates are higher than fixed mortgage rates. With inflation showing signs of returning to normal, mortgage lenders including the banks, are pricing in that rates are likely to go lower within the next 5 years.

Despite a looming risk of recession the unemployment rate in Canada remains relatively low. This economic data is likely leading to delays in the anticipated interest rate cuts from the Bank of Canada as high employment is correlated with inflation. As of June 2023, unemployment is on the rise meaning interest rates hikes are having the intended effect.

As of our July mortgage rate outlook, we predict that in the long term mortgage rates will trend towards 4%. In the chart below, you can see how our 5-year variable rate forecast has changed over time based on the Bank of Canada interest rate announcements.

The current focus for the Bank of Canada is bringing inflation back in line with the targeted 2%. Currently variable rates are predicted to increase over the remainder of 2024 before beginning to decline in 2024. If the Bank of Canada begins to lower rates in 2024 Adjustable rate mortgage holders will see lower payments.

As of May 2023 it looks like inflation is continuing to slow as a result of rate hikes from the bank of Canada. Canada's core inflation dropped to 3.95% in May 2023, compared to 4.42% the month prior and 5.20% in May 2022. The Bank of Canada wants to reach its 2% inflation target faster, and is hiking rates to send a clear message that it means business.

Key Terms:

Adjustable rate mortgage: An adjustable rate mortgage is similar to a variable rate mortgage, but the monthly payments fluctuate up and down with interest rates.

Core inflation: Core inflation is a measure of the change in the price of goods similar to the CPI, but does not include food and energy costs, which are highly volatile.

How will the latest Bank of Canada interest rate announcement affect home prices?

2022 saw declines in home prices across the board in Canada, bringing prices closer to their pre-pandemic levels in some cities. With analysts across the board predicting an eventual policy reversal on the horizon from the Bank of Canada, the market might not stay low for long. If rates start to come back down, it's likely prices will quickly rebound to their prior highs and beyond.

Buyers are coming back and the real estate market is seeing more activity following expectations that rates will hold steady for the short term. We believe that property prices have hit their bottom earlier this year and we'll continue to see increases in property prices in the second half of 2023 and into 2024.

In May alone, the average Toronto home price was up 3.50% according to the Toronto Regional Real Estate Board.

Borrowers won't see lower rates for at least 1 year, but housing prices in major cities have already started to recover from their lows earlier this year. The next few months will be a very opportune time to buy and anyone on the sidelines should seriously consider executing now before the window of opportunity closes.

Where will mortgage rates be in 2024?

According to financial models by Alex Leduc, Principal Broker at Perch, 5-year variable mortgage rates should start dropping sometime in 2024.

Will mortgage rates go up in the next 5 years?

Based on our latest Mortgage Rate Outlook, expect 5-year variable mortgage rates to start dropping in 2024 and continue doing so into 2025. We'll be updating our mortgage rate forecast after every Bank of Canada interest rate announcement – you can subscribe to our mortgage rate forecast for free.

What is the Bank of Canada interest rate today?

The current Bank of Canada interest rate sits at 5.00%, with a 0.25% rate hike announced on July 12, 2023.

When is the next Bank of Canada interest rate announcement?

The next scheduled Bank of Canada interest rate announcement is Wednesday, September 06, 2023 at 10:00 AM ET.

What are the remaining interest rate announcement dates in 2023?

There are a total of 8 Bank of Canada interest rate announcements each year. The remaining dates are as follows:

  • Wednesday, September 6, 2023
  • Wednesday, October 25, 2023
  • Wednesday, December 6, 2023

The Bank of Canada typically makes their interest announcement at 10:00 AM Eastern Time.

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