Bank of Canada Mortgage Rate Announcement - September 2022

September 9, 2022 | Posted by: Ron Chan

Bank of Canada Mortgage Rate Announcement - September 2022

After being silent on the interest rate front through August, the Bank of Canada has started 'back to school' season with the planned press release regarding the prime rate. They made the announcement on Wednesday September 7, leaving prospective home buyers with plenty to ponder. Are you among those who are considering getting a mortgage in the remainder of 2022? Will the latest news impact your decision? Here's what you need to know.

What Home Buyers Need to Know About the September 2022 Bank of Canada Announcement Regarding Lending Rates

The Bank of Canada Announces Another Significant Increase

In their July announcement, the Bank increased the prime rate by a full 1-percentage point. In doing so buyers witnessed the largest overnight increase in nearly two-and-a-half decades. While some economists assumed that it would be the end of increases for the annum, most mortgage specialists predicted another rate hike to follow on their September 7th update. The consensus was that the rise would be by a 50-basis percentage increase. It wasn't. The Bank of Canada is still making bold moves with a 75-basis point hike. The overnight rate is jumping to 3.25 percent. Keep in mind that the rate was 0.25 per cent at the beginning of 2022.

The current lift isn't as dramatic as the 1-percentage point from July, but it's still quite significant. But is it enough to stem your desires to get pre-approved on a mortgage this autumn season to come?

Variable Mortgage Rates Expected to Rise (act now)

The Bank of Canada announcement will more than likely increase variable mortgage rates. Those currently holding variable rate loans are about to see their monthly (or other) payment requirements increase in the coming days. That's them. What about you? As you may or may not know, this is simply the nature of variable mortgage rates. If you haven't started a mortgage yet, what rates were at the onset of 2022 is of no importance. What matters is what is happening here and now. At press, RBC is marketing theirs at 5.250% while CIBC is marketing their comparable at 5.20%.. The other Big Banks hover in the same zone. The variable mortgage rates are certainly 'above average' for the last two decades, but far superior to what your parents paid for their mortgage prior. 

Will variable rates rise again? The Bank of Canada has delivered five large rate hikes in six months, and it's not over. Expect at least one more rate increase in 2022, maybe two. If you're wondering if you should get pre-approved on a mortgage today, or wait a month or two, err on the side of caution and act now. 

Fixed Mortgage Rates Expected to Rise (act now)

Are you instead inclined towards a fixed rate mortgage? As you may or may not know, fixed mortgage rates are tied to the Bank of Canada's activity in the bond market and quantitive tightening. Quantitative tightening shrinks the Federal Government's balance sheet by either selling (vs buying) government bonds, or by letting them mature and removing them from its cash balances. This removes money from the Canadian economy and leads to higher interest rates. This is what is occurring right now, so fixed rates are also expected to rise. If you prefer the stability of fixed rates over variable rates, lock in right now while it's still affordable.

Contact Ron Chan at 204.290.9950 to discuss your Winnipeg mortgage options given the recent Bank of Canada announcement.

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