Bank of Canada Mortgage Rate Announcement - July 2022
July 14, 2022 | Posted by: Ron Chan
Earlier this month in our Winnipeg real estate news report, we told readers to expect a Bank of Canada prime rate announcement on July 13. That day has passed, and if you've heard the rumblings thus far, you'll know that the announcement was a big one. If you're in the market for a home, is there any reason for you to delay your ambition this summer? Or should your response be the opposite and to instead act now? Let's find out.
What Home Buyers Need to Know About the July 2022 Bank of Canada Announcement Regarding Lending Rates
The Bank of Canada Goes Big with the Largest Increase Since 1998
Let's drop this news head on. The Bank of Canada increased the prime rate by a full 1-percentage point. This is the largest overnight increase since 1998, exceeding expert expectations of a .75% increase which would have matched the U.S. Federal Reserve’s benchmark rate from a couple of weeks ago.
As a result, local and national news media across Canada has put buyers on edge. With a prime rate being raised above already high expectations, variable mortgage rates are sure to rise beyond reason too, right? Once again we ask you to put everything in perspective. Let's take a look at the Bank of Canada prime rate from 2000 to July 2022:
To begin with, it's true that the prime rate is as it's high as it has been in since 2008. But let's really look at that. Remember what happened in 2008? The financial crisis which was caused by unscrupulous investment banking and insurance practices that passed all the risk to investors, including home buyers. While US-based, it caused an economic crisis in Canada too, which is why the BoC dropped the prime rate to record lows. Fast forward to 2020, and we see the prime rate drop to record lows again as the government enforced economic lockdowns that shook markets across Canada. In both instances we see that low rates are an anomaly. They are a response to a crisis. They are not normal, and neither are the mortgage rates that accompanied them. Are you really going to wait around for a financial crises to move forward with buying a home? If so, you could be waiting for another ten years, maybe even longer. The Government of Canada and Bank of Canada understands that the country cannot survive another shutdown of such nature. Lessons learned, so on and so forth.
What will happen if you wait a few weeks or months to see what happens next with the BoC prime rate and correlated variable mortgage rates? We can say with relative certainty that the prime rate will not decrease in 2022. It will either stay the same, or rise even further, with variable mortgage rates following suit. Fixed mortgages rates will also climb as the BoC will also continue to tighten quantitive easing. By heeding mainstream media's panic attack, you only rob yourself of the opportunity to get into the market while rates are still reasonable, and while there are still favorable homes available (that's tightening too). Simply put - if you put off getting a mortgage in Winnipeg any longer, you'll very likely pay more. And if you feel better about making historical comparisons, find peace of mind that you’re much better off than those who purchased a home in the first-half of this millennium.
Let's get you pre-approved on a Winnipeg mortgage today. Ron Chan will get you access to lower unadvertised mortgage rates, and can match you to first-time buyer incentive programs (as applicable). And if better suited to your financial situation, Ron can connect you to alternative private lenders who look beyond credit history.
Contact Ron Chan at 204.290.9950 to get started with a friendly conversation.