Mortgage Logic

Bank of Canada – Good News, Bad News Today

Today the Bank of Canada (BoC) raised its key rate by one-half of one percent (0.5%).  Many experts were thinking that the BoC was going to announce a 0.75% increase and are now reading into the news that we may be near the end of tightening (raising) interest rates.  The equity investing community would like nothing more than this, but only inflation statistics going forward will determine whether and how much interest rates will change.

The primary purpose of the BoC is to protect our economy from inflation and its destructive ability.  Our current inflation woes are primarily caused by:

1.) The Chinese supply economy being effectively shut down due to their current covid concerns, thus no one manning the factories to produce the goods that they sell to the world en masse. 

2.) The current U.S. administration’s restrictive approach and policies toward fossil fuels, which has hampered supply to North America, driving prices up unnaturally.

Many economists and investment people are seeing the end of the tightening cycle coming near the end of this year, into next year.  Hopefully, interest rates will stabilize and even start to ease off into 2024. 

Advice to mortgage holders is unique to each but generally speaking: If you are in a mortgage right now, hang in there until maturity, especially if you are 1-3 years from maturity.  If you are in a variable rate mortgage, unless you have some other more expensive debt that you would like to consolidate, hang in there and do not convert to a long-term rate.  If you are just getting into a mortgage right now – go variable/adjustable and ride the wave down.