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TagVariable rate

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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When Will Variable Rates Stop Climbing?

For millions of Canadians, the Bank of Canada meetings are a major cause of anxiety. Will rates go up? By how much? Will I continue to be able to meet my monthly mortgage payments? It’s only natural to ask these questions. Recent hikes have been dramatic to say the least. And to make matters worse, the media has a way of making everyone feel like these hikes are in a perpetual uphill climb. 

But in my opinion, a plateau is coming sooner than expected. 

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Variable Rates Go Up, Fixed Rates Come Down

If you’re reading this, you probably know by now: the Bank of Canada has been raising their benchmark rate aggressively to battle inflation. And I mean aggressively. Their rate has gone up by 2.25% in 6 months which is absolutely – wait for it – unprecedented.

As a result, variable rates have shot up. Everyone expected fixed rates to follow suit – but interestingly enough, the opposite has happened. They’ve actually gone down. Yup, you read that right: while variable rates are going up, fixed rates are going down.

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