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The Bank of Canada announced on October 25 they will hold interest rates steady for the time being. The current overnight rate remains at 5.00%.

We predicted that the Bank of Canada would hold rates steady in our interest rate forecast as a result of slowing inflation and a weakening economy.

The current overnight rate remains at 5.00%. 

How will the latest Bank of Canada interest rate announcement impact the mortgage market

The latest Bank of Canada interest rate announcement occurred on October 25. The Bank of Canada announced they were going to hold rates steady in October following reports of slowing inflation and a stagnating economy. This is the second such pause in recent times as the Bank of Canada last paused rate hikes in January to evaluate the effect of previous interest rate increases. The current policy interest rate remains at 5.00%.

After their last pause the Bank of Canada resumed tightening monetary policy with another 25bps hike in June of 2023. While pausing rate hikes means the central bank may think we’re close the end of our current inflationary period, recent data has made it more likely that the Bank of Canada will raise interest rates again.

As of today, variable mortgage rates are still higher than fixed mortgage rates. While rates may increase in the short term, with a longer time horizon mortgage lenders are pricing in that rates are likely to go lower within the next 5 years which is why variable rates remain higher than fixed rates.

As of our October mortgage rate outlook, we predict that in the long term mortgage rates will trend towards 5%. 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. (Like what you see? Sign up to get free, personalized mortgage insights and our monthly mortgage outlook!)

“With record wage inflation over the last five years, many people will be able to absorb the higher mortgage cost and those that can’t have the ability to extend their amortization to make things work.” said our CEO Alex Leduc in an article for the Financial Post.

The current focus for the Bank of Canada remains bringing inflation back in line with the targeted 2%. The Bank of Canada is anticipated to begin cutting rates in late 2024  into 2025. During the next few years adjustable rate mortgage holders are likely to see lower payments.

Related: Why are variable rates higher than fixed rates?

Buying now gives you the opportunity to lock in a lower purchase price in today's market, benefitting you in the long run. Think of it this way: You date the mortgage payment, but you marry the purchase price.

In other words, your mortgage payment can fluctuate as you change terms, but your purchase price remains the same.

We increasingly see new buyers opting for a shorter mortgage term with a higher amortization to minimize their monthly payments. This enables them to potentially renew at a lower rate a few years from now, and in the long run, accelerate their amortization to pay off their mortgage earlier.

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

2023 saw declines in home prices across the board in Canada, bringing prices closer to their pre-pandemic levels in some cities. Despite recent rate hikes analysts across the board are predicting an eventual policy reversal on the horizon from the Bank of Canada leading to prices increases. When rates start to come back down, it's likely prices will quickly rebound to their prior highs and beyond.

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. 

As of September the current home price index rose o.4% month over month in Canada.

According to the Toronto Regional Real Estate Board high interest rates and uncertain economic conditions have cause the market to slow but population growth is likely to lead to continued price increases in the future.

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 give thought to purchasing sooner rather than later.

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 in late 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, December 6, 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 for 2023 are as follows:

• Wednesday, December 6, 2023

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

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