The Bank Of Canada Has Increased Interest Rates Yet Again & Here's What That Means For 2023
An expert shares how this will impact homeowners and renters.👇
The Bank of Canada. Right: Apartment buildings and condos in Vancouver.
The Bank of Canada has just announced another interest rate hike, in an attempt to curb the inflation we're seeing across the country.
Announced on December 7, this is the Bank of Canada's seventh interest rate hike this year.
It has risen by 0.50%, bringing the total rate from 3.75% to 4.25%. All of this might have some Canadians confused or even a bit worried.
To help, Narcity sat down with James Laird, Co-CEO of ratehub.ca and president of CanWise mortgage lender, to talk about the latest interest rate announcement and how you can expect to be impacted by it.
What does the interest rate increase mean for homeowners?
This recent announcement, and others like it, are like a "double-edged sword".
"There's both help and hurt with these higher rates," explained Laird. "The hurt is the mortgage rates are higher, so homeowners can qualify for less and the mortgage payments are higher."
However, there is a "silver lining" with the rate increases, at least for potential homeowners, or those looking to buy a house in the near future.
"These higher rates have pushed home prices down fairly significantly in most markets across the country," explained Laird.
So, the cost of a house might be going down, but getting a mortgage, and paying it, is only going to get more expensive.
What does this mean for renters?
Renters across the country can expect rental prices in Canada to increase thanks to the recent rate hikes.
"Renters are seeing their rates increase fairly rapidly, which is a direct result of the higher carrying costs of mortgages," said Laird.
This makes sense as, if the cost of housing goes up, landlords will offset those costs onto their tenants.
So, brace yourselves, renters. It looks like rental rates are going to increase even more.
Are more interest rates hikes coming in 2023?
According to Laird, we can expect more interest rate hikes in 2023.
" [From where] I'm sitting, there will be a total of 50 to 75 basis points [.50% to .75%] over the next two [announcements]," said Laird, based on past Bank of Canada announcements and the state of the current bond market.
However, it really depends on how high the inflation is.
"I believe the bank is hoping that once they do a little more rate hiking, [...] that holding it at that level will be enough for inflation to march back to their long-term target of 2%," explained Laird.
"If that happens, consumers can expect no more rate hikes. If inflation is more stubborn, then the bank might have to hike rates further."
Hopefully, this helps with what to expect in 2023.
And, if buying a house is on your radar in the upcoming year, Narcity sat down with an expert to find the best advice to buy a home in Canada.
This article's cover image was used for illustrative purposes only.