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TagFixed rates

What To Expect in 2023

Happy new year everyone! I hope everyone reading this took some time to reflect and recharge over the holiday season. There was a lot of negativity swirling around in 2022, and I’m sure a lot of you needed a break from it all. I sure did. It’s easy to get swept up in all of the doom-and-gloom. But if you look at the big picture, you might see that there’s a lot to be optimistic about in 2023 – in the housing market, the economy, and beyond.

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A Stand-Off Between the Bank of Canada and the Government of Canada

To start off, a bit of good news for once: the average 5-year fixed rate mortgage has fallen over the last two months. Some qualified borrowers are now able to secure a rate as low as 4.89%. But of course, it is good news, so you probably didn’t see it reported in the mainstream media. 

Here’s what you likely did see: the overnight rate went up by yet another 0.50% on December 7 to 4.25%. Another staggering increase at a time when most experts predicted rates would start levelling out. Not only is this rate hike significant – it’s actually record-breaking. A whopping 4.00% increase in just 9 months took us from some of the lowest rates of this century to the highest.

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How To Navigate Today’s Economy

Rumour has it the worst is yet to come. On October 26th, Bank of Canada Governor Tiff Macklem will very likely increase rates by another 0.50%. Not only will this push the bank prime rate up to 5.95% – it could lead to the average 5-year fixed rate mortgage well above 6.00%. What a mess. As I mentioned in my previous article, the BoC made a critical error and the Canadian people are continuing to pay for it. 

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A Broken Promise Leads To A Broken Economy

The Bank of Canada has always avoided forecasting rate hikes and rate cuts. It’s always been a closely guarded secret left to speculation – that is, of course, until July 2020. In what might have been the first announcement of its kind in the history of the BoC, Governor Tiff Macklem publicly stated that “interest rates are low and will stay low for a long time.”

The central bank didn’t anticipate having to raise rates until 2023 and for some reason made a choice to communicate that to Canadians. Naturally, Canadians made financial decisions accordingly. Big financial decisions. All on the basis of a promise made by a government institution they knew and trusted.

As we’re now learning, that promise was impossible to keep.

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The 3 Questions I Get Asked Most About Rising Rates

It’s no secret to anyone reading this: rate hikes have gone off the rails. On September 7th, the Bank of Canada announced yet another whopping increase of 0.75% leaving economists scratching their heads. Typically rates increase or decrease by 0.25%, if they change at all. Inflation has forced the BoC to make some pretty drastic decisions… but have they gone too far? 

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