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Bank of Canada rate hike.. it’s really not a big deal.


Stephen Poloz, the Bank of Canada Governor, raised the Target rate by 0.25% to 0.75%.   Maybe now the media will move on to other news.

Seriously, aren’t we all kinda tired of hearing how rates are going to skyrocket,…how this is going to make our mortgages unaffordable… how we have record debt levels.. how we are going to default our mortgages, lose our homes and go into a recession…it’s doom and gloom?  This isn’t happening.


Ladies and gentlemen, here’s what this means.   Banks will probably raise their Prime rate by 0.25%.  Variable rate mortgages will go up by 0.25%.   The Bank of Canada will monitor how this rate increase impacts the economy and will act accordingly.  That’s it.  There really isn’t more to tell you or more that you should know.

There is speculation on when or if the Bank of Canada might rate their rate again. So, here’s some things you may want to know:


Historically, the Bank of Canada used to raise and lower the rate 2 to 3 times a year.   This all changed after the US sub-prime mortgage rate crisis in 2008.  Since then, Central bankers around the world cut and reduced their Target rate to stimulate their economies.

We seem to have forgotten that rate adjustments are normal.    2008 was 9 years ago. Maybe it’s time for a history lesson.  We can learn from our past.

  • Historically, Variable rate mortgages have outperformed fixed rate mortgages in over 80% of the time.
  • Variable rates vs 5 yr fixed rate.. the spread has been between 0.20% and 3.00% in favour of Variable rates.  Usually it’s 1.00% (yes, as much as 3.00% at one point)
  • Fixed rates are priced from the 5 yr Gov of Cda bond yields but there is a direct correlation to the Bank of Canada rate.
  • Bank of Canada sets the rate to stimulate the economy or slow it down.
  • Bank of Canada has target inflation rate of between 1.00% and 3.00%.  (today it is very low at 1.3%) but the forecast is for stronger economic reports this year, which is why Poloz raised the rate.
  • mortgage rates have been at historical lows for over 7 years.
  • borrowers are qualified at the Bank posted 5 yr fixed rate which is 4.64% today and has been as high as 7.39% in the last 9 years.
  • mortgage defaults are at all-time or near all-time lows under 0.30% nationally, but as low as 0.14% in Toronto.

It’s amazing how very few are talking about how we are still enjoying near record low rates.  And how we are managing our debts and paying them very well, thank you very much.

Don’t bury your head in the sand but let’s focus on the positive.  The Bank of Canada thinks our economy is improving and there will be more jobs created.  There’s more positive than negative in Canada, I’d say.  Canada is doing way better than most of the world.  We have it pretty good here.

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114

Steve Garganis View All

As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.

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