The Bank of Canada has raised its lending rate for the eighth straight time but economists are predicting that this will likely be the mortgage rate peak. In an attempt to combat inflation the Bank raised the lending rent 7 times in 2022 which started at 0.25%, and after the most recent increase the lending rate is sitting at 4.5% for fixed rate and around 6% for variable rate. Their hope was/is that by making it more costly to borrow money, more people will spend less and hopefully prices will go down.
Economists are predicting that the Bank is going to keep the rate at its current level and then assess in the coming months the impact of the cumulative rate hikes. Like in any field there are different opinions amongst economists, one in particular mentions that they tend to look at the bond market when predicting where the rates will trend and that market is currently falling. Another has suggested that even though we saw inflation hit a peak in June, the price for goods and services has not come down. Since the original goal for the Bank of Canada was to drive prices down by increasing the rates this leaves some economists with uncertainty that this is the peak.
If this is the mortgage rate peak the next question to ask is how long will homeowners and those looking to get into the market have to wait until rates go back down. Some are predicting that the rate won’t be cut until early 2024 and that it is unlikely that they will go back to pre-pandemic levels. Hopefully with the rate being stagnant it will allow homeowners and buyer to feel confident about ownership again.
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