Bank of Canada Summary December 2022
Latest from the Bank of Canada: Prime Increases to the Highest Level in 15 Years
The Bank of Canada has increased its overnight rate by 50 basis points.
Prime Rate for the majority of Banks and other financial institutions will increase to 6.45% (from 5.95% previously).
BoC Announcement Highlights:
Inflation
- CPI inflation remained at 6.9% in October, with many of the goods and services Canadians regularly buy showing large price increases.
- Measures of core inflation “remain around 5%”, above the 2-3% target range.
- Three-month rates of change in core inflation have come down, “an early indicator that price pressures may be losing momentum.”
Canadian Economy & Housing
- GDP growth in the third quarter was stronger than expected, and the economy continued to operate “in excess demand.”
- The labour market remains “tight” with unemployment near historic lows.
- Housing market activity continues to decline.
- The Bank’s outlook: growth will essentially stall through the end of this year and the first half of 2023.
Global
- Inflation around the world remains high and broadly based.
- The US economy is weakening but consumption continues to be solid and the labour market remains “overheated.”
- Gradual easing of global supply bottlenecks continues, although progress could be disrupted by geopolitical events.
What does this mean for your (Variable) Mortgage?
Analysts will seek to interpret
today’s announcement for signs that the Bank has reached the end of its current rate-hike cycle. To the dismay of borrowers with products tied to Prime, the Bank continues to state that inflation is “still too high” and that short-term “inflation expectations remain elevated.”
Variable Rate Mortgage Holders (VRMs) with Static Payments:
Your payment amount will not change unless you’ve reached your trigger rate - when your payment no longer covers your interest. Your lender will communicate any increase and the effective payment date.
Adjustable Rates Mortgage Holders (ARMs):
For traditional ARMs, there will be an increase to the mortgage payment: ~ $26 per $100,000 mortgage. Your lender will communicate your new payment amount and the effective payment date.
Over the past 30 days bond yields have dipped and we are seeing fixed rates trending below variable: (HR) 5-year Fixed, 4.77%
If you are considering locking into a fixed rate,
please
book a call,
and we will review all factors to consider before making the change.
The potential
“silver lining" for those looking to buy a house in the near future, is that as rates push higher, and home prices soften, the overall cost to the borrower may decrease (less down payment required, and lower mortgage amount/payments).
Download the Nest Mortgage App to review your mortgage qualification, rates & payments, and all calculators.
January 25th, 2023 is the next scheduled announcement, and Nest will continue to provide in-depth summaries. Want to learn more? For everything mortgage, please reach out!




