Bank of Canada Summary July 2022
Latest from the Bank of Canada: A 100 basis point increase, the largest single-day move since 1998.
The Bank of Canada increased its overnight rate target by a staggering 100 basis points today, 25bpts higher than anticipated, unabating its policy of quantitative tightening.
Specific to Variable Rate Mortgage holders, Prime will increase from 3.70% to 4.70%.
Inflation in Canada is higher and more persistent than the Bank expected. The annual rate of inflation hit 7.7% in May and is expected to average 7.2% in 2022.
BoC Announcement Highlights:
- Global inflation is higher, reflecting the impact of the Russian invasion of Ukraine, ongoing supply constraints, oil prices remaining high/volatile, and strong consumer demand.
- Central banks across the globe are tightening monetary policy to combat inflation, resulting in tighter financial conditions in attempts to moderate economic growth.
- The Canadian economy sees further build up in excess demand. We continue to see record low employment rates, widespread labour shortages, and increased wage pressure. Costs are being raised as businesses pass on higher input and labour costs due to strong demand.
- Housing market activity is slowing following record highs over the past 2 years, and will “pull back following unsustainable strength during the pandemic”.
- CPI inflation of 7.7% is well above the Bank’s target and is likely to move even higher before easing off. Inflation continues to broaden with core measures of inflation ranging between 3.9% and 5.4%.
A Look Ahead
The July outlook has inflation starting to come back down later this year, easing to about 3% by the end of 2023, and returning to the 2% target by the end of 2024.
The economy continues to operate in excess demand, inflation persists high and above target, and the expectation from consumers is that inflation will continue this path for longer. These expectations led the Governing Council to front-load the path to higher interest rates.
“The Governing Council is resolute in its commitment to price stability and will continue to act as required to achieve the 2% inflation target.”
The BoC will continue to judge further increases based on economic performance between now and the next announcement September 7th, 2022.
Rate Landscape & Recommendations
- Best fixed-rate mortgages available today are 4.79 (high ratio) – 5.34% (conventional).
- Fixed-Rate Mortgages are not affected by today’s announcement, however, if your mortgage is up for renewal, it would be wise to reach out to Nest and secure a rate hold as early as possible.
- By comparison, variable-rate mortgages are offered at 3.70% (high ratio) - 4.20% (conventional).
- If you have an Adjustable-Rate mortgage, your payment will increase by roughly $52 per $100,000 owed. Your lender will be in touch with the new payment amount and date.
- If you have a Variable Rate mortgage with static payments, it may be time to look at voluntarily increasing your mortgage payment to stay ahead of a forced payment change if/when your payment no longer covers the interest.
- What we have experienced as of late is the most aggressive rate tightening cycle in more than 20 years. Since March 2022, we've seen a 2.25% increase to the overnight rate. Variable rates continue to outperform fixed (by ~100bpts+ on average).
- If you are considering a mortgage this year: buying, selling, renovating, investing, or other, please reach out to Nest to get pre-approved ASAP. We will quickly determine how much you will qualify for, lock in the best rate for 90-120 days.
Despite today’s 100-basis point hike, and further increases anticipated over the upcoming months, Variable over Fixed, as we have shared previously remains the recommendation.
Uncertainty can be challenging, and we are here to help! If you would like to discuss your specific mortgage details further,
reach out to Nest Mortgage today!




