NEWS

On September 7, 2022 the Bank of Canada did not falter on the predictions as it increased the Overnight Rate another 75 basis-points (Bps) bringing the central bank’s rate to 3.25%.. As the bank continues to fight inflation, there have been some signs that the rate hikes are having some effect as inflation has eased in July to 7.6% from the previous month’s 8.1%.

The Canadian economy continues to operate in excess of demand and labour markets are remaining tight. The country’s GDP did grow 3.3% in the year’s second quarter but was still weaker than the central bank had projected. Several Canadian Major Banks have expressed the opinion that the rates will continue to increase so the Overnight Rate will be brought to 4.00% and maybe even higher.

Bank of Canada Rate Announcement Media Release

Despite the rate hikes forcing Canadian Mortgage Borrowers to qualify at rates in excess of 6.00% and 7.00%, the Office of the Superintendent of Financial Institutions (OSFI) squashed the prospect of loosening the Stress Test for conventional insured or uninsured mortgages. Peter Routledge, head of OFSI, explained “Rising policy interest rates will lead to higher debt servicing costs which, combined with heightened inflation, will pressure Canadian households.”

Sources: Bank of Canada, Canadian Mortgage Trends