Mortgage Logic

BoC Today – Are we at an End of a Rising Bank Rate Cycle?

The Bank of Canada (BoC) has raised its Key Overnight Lending rate by 25 basis points, bringing it to 4.50%, and the Prime rate of interest to 6.7%.

This is the BoC’s eighth consecutive rate hike and was anticipated by markets and many economists.

Looking ahead, the Bank said it “expects to hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases,” but that it is also “prepared to increase the policy rate further if needed.”

Is the Bank of Canada at the point in the current cycle to stop increasing interest rates? It appears that the Bank is signaling that it is comfortable with what it has done so far and is aware that recent rate hikes are creating hardship for Canadians. It will likely cease pushing rates upward after today’s increase for a few months and reassess if further moves are required based on inflation and other economic data.

One important thing to watch is whether the fixed lending rates continue to separate from the prime-based floating lending rates in their pricing.  We have been noticing this of late and it is important to understand that; whereas the BoC rate may influence the fixed lending rates, it does not directly determine them.

There is a growing consensus that the Bank has now reached its terminal rate for this rate hike cycle.  Their next scheduled announcement will be on March 8.

For the most advanced mortgage advice and discussion on what you should be doing for your lending needs, please feel free to contact us at Mortgage Logic.

                        “Don’t Go to the Bank!  Go to the Market” ®