The Bank of Canada has announced another quarter point hike to its benchmark rate.  This is the eighth consecutive rate increase in its mission to curb inflation that had surged to its highest level in nearly 40 years in June of last year.  Read their full announcement

There is a growing consensus that the Bank has now reached, or is close to, its terminal rate for this rate-hike cycle. Officials from the Bank of Canada have indicated that its future rate decisions will be driven by economic data. The next announcement will take place March 8, 2023.

As noted in Mortgage Professionals Canada’s January 2023 Housing and Mortgage Market Review released Monday, some progress has been made in the fight against record-high inflation.

While borrowers have so far been largely resilient in the face of sharply higher interest rates, we can’t ignore the affordability challenges that are being faced by many.
The hope is that inflation will continue to moderate in the coming months and that this is the final rate hike variable-rate mortgage borrowers will have to contend with. The uncertainty we continue to see in the market under scores the value of mortgage professionals.
– Lauren van den Berg, President & CEO, MPC

Leading up to today it was clear the BoC still had work to do:

The Consumer Price Index (headline inflation) did slow to 6.3% in December, from 6.8% in November and is down from 8.1% where it was in June, but it is still well above the Bank’s target rate of 2.0%.  Food and fuel continue to be the two biggest influencers.  Gasoline was down 13% compared to a month earlier but grocery store prices continued to rise at an annualized rate of 11%.

The Bank of Canada prefers to measure Core inflation when making its rate decisions.  Core inflation excludes, so-called, volatile items like food and fuel and is divided into three different types: CPI-common, CPI-median and CPI-trim.  Encouragingly, the average of those three measures slowed to 5.3% in December, down from 5.4% in November.  Higher shelter costs, including rising mortgage rates and increasing rents, were key components in the Core inflation calculations.

The Canadian economy added a stunning 104,000 jobs in December.  That was more than 20 times the 5,000 that had been forecast.  The unemployment rate fell to 5.0%.  The job growth and the inflation numbers suggest the economy is still quite strong.

And on a hopeful note, the economic think-tank The Conference Board of Canada is forecasting that inflation will be back inside the BoC’s target range of 1% to 3% by the end of this year

What can we expect?

The Economic Club of Canada held its annual outlook meeting which features four of the country’s leading economists who offer their predictions for employment, the housing market, inflation, interest rates and more for the coming year.

Would you like to check out the key observations of Canada’s economic thought leaders. You can do so here. (courtesy of First National Financial)

As your Mortgage Broker, we have a vested in interest in these topics and remain focused on getting you the right information. Having considered all of the predictions, we remain optimistic about the resiliency of Canada’s housing market in the short run and bullish about the long-term future.

As always, we are open for business and ready to serve you.  Please let us know if we can assist you or answer any of your questions.

Signature Mortgage Group


(Sources: Mortgage Professionals Canada, Bank of Canada, CMP, First National)