Interest Rates to Stay As-is for Now. But When Will They Rise Again?

The Bank of Canada governor, Till Macklem, made no change to interest rates on April 21st, the 3rd of 8 annual meetings dates. This comes as no surprise, though, There wasn’t a chance of an interest rate hike anyway. You can read more on this here .

When Might We See Interest Rates Rise?

The governor publicly stated in October 2020 that interest rates would remain as is until we get out of the covid crisis. He did hint that we could see the economy improve enough in late 2022 enough so that he may increase the interest rates then.  

Many economists believe this is very possible. However, many also think this may not last long given how fragile the economic recovery will be. We’ve seen the Bank of Canada rush to raise rates in the past only to backtrack and reverse that decision. 

With record high home prices and equally as high average mortgage balances, the governor will need to be very careful not to push too hard too fast or we could see a domino effect. The Federal government also has set new spending records. The national debt has become a burden that is going to be very costly to service for many decades to come. 

OSFI (Office of the Superintendent of Financial Institutions) has tabled a proposal to increase the minimum qualifying interest rate to 5.25% or + 2% above your actual contract rate. The plan was to slow the rise in real estate prices. This is a move few believe will accomplish such a thing. 

Put this altogether and it becomes less likely that interest rates would skyrocket or go up without some a pause to ensure the economy can truly handle the increase. There are other tools at the government’s disposal versus raising interest rates. 

My Bottom Line 

Personally, I think rates could go up slightly towards the end of next year but they should not continue to rise for long. We are in a period of sustained low rates. This should continue for many years.  

Your own mortgage plan should not be built around where interest rates are headed but more tailored around your personal budgets, goals and objectives. There is no one size fits all mortgage product. The best advice I can give is to speak with an experienced mortgage professional and get a plan designed around you.  

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@canadamortgagenews.ca