On Wednesday, September 7, 2022, the Bank of Canada was expected to make its next rate announcement. According to most analysts, this time the bank would raise its rate by 0.75%, bringing it to 3.25%.
This post was first published in early September 2022, before the announcement. The figures below are from that time.
What analysts expected from the next rate announcement
Most analysts agreed on the size of the move. They expected an increase of 0.75%, which would bring the rate to 3.25%.
A move that large is not small news for homeowners. So many families with variable-rate mortgages, and many buyers still shopping for a home, watched this date closely. In fact, each rate decision can change what a buyer can afford and what a homeowner pays each month.
If you are new to the process, my post on how often the Bank of Canada announces its rate explains the schedule.
Inflation before the next rate announcement
The Bank of Canada’s main target had been to control an inflation rate near a 40-year high. With the bank’s aggressive rate hikes, the exploding inflation lost some of its steam. It came down to 7.6% from the 8.1% seen in June 2022.
That drop was an early sign of relief. Still, inflation remained far above the bank’s goal. Therefore, most people expected the next rate announcement to bring another increase rather than a pause.
Governor Macklem’s front-loaded strategy
In his last speech, Bank of Canada Governor Tiff Macklem replied to a question about his approach. He said the bank had pre-emptively struck inflation head-on by front-loading its rate hikes, so it could see an immediate effect on inflation.
With inflation turning downward, it appeared that the bank’s strategy had worked. In other words, the bank chose to move early and hard, instead of slowly over a longer time. That choice shaped what markets expected from the next rate announcement.
Risks: household debt and the path ahead
Not everyone agreed with the pace. Some economists warned about rising business and household debt as a result of these hikes. Higher rates make every loan more expensive, from mortgages to lines of credit.
On the other hand, some experts believed that this could be the last hike the bank would make. Both views mattered, because the next rate announcement would set the tone for months to come.
For homeowners, the practical step is simple. Know your mortgage type, your renewal date and how much room your budget has. Then you can plan ahead, instead of reacting after each decision.
What the next rate announcement meant for real estate
No one can predict what will happen next in the real estate market. However, listening carefully to the Governor’s speech would be very important to gauge the bank’s next move. You can read the bank’s decisions and speeches on the Bank of Canada website.
There were also signs of a reversal in housing prices. At the time, I promised to share my analysis once the real estate boards released their reports the following week. Since then, you can read my August 2022 market analysis and what the bank decided on September 7.
Whatever the next rate announcement brings, a few habits help. Buyers can get a mortgage pre-approval early, since many lenders offer a rate hold with it. Sellers can price with care, because buyers feel every change in rates. And homeowners can talk to their lender well before renewal. These steps keep you in control, whichever way rates move.
The Toronto Star also ran a good article on the topic that day: Bank of Canada expected to raise interest rate for fifth time at pivotal moment for economy.
Talk to a Mississauga real estate agent
Do you have questions about how rate changes may affect your home, your mortgage or your next move? Please send me a message or call me directly at 416 908 5600. I am A. Q. Mufti, Sales Representative, RE/MAX Real Estate Centre Inc., Brokerage, and I am always glad to help. If this post was useful, you can also leave a Google review.
Disclaimer: this article was published on 18 January 2025 and reflects the information available at that time. Interest rates, prices, and government programs change, so check the current position before acting on anything here. It is provided for information only and is not financial, mortgage, tax or legal advice. A. Q. Mufti is a registered Sales Representative with RE/MAX Real Estate Centre Inc., Brokerage, Ontario, Canada.
