Here's all you need to know about the increase in interest rates in July,

On July 12th, the Bank of Canada made an announcement stating their intention to raise the key interest rate by 25 basis points. This marks the third increase this year as the Bank of Canada continues to assess the impact of ongoing rate hikes on inflation. In May, the previous rate hike raised the key rate to 4.75%.

The current overnight rate now stands at 5.00%.

Key Takeaways:

• The Bank of Canada has announced a 0.25% rate hike in July, with the next rate announcement scheduled for September.
• We anticipate a slight increase in fixed rates in July, while variable rates are expected to remain stable.
• The current best mortgage rates are 4.97% for a 5-year fixed term and 5.85% for a 5-year variable term.
• The latest Bank of Canada interest rate announcement will impact mortgage rates, and we predicted in our Mortgage Rate Outlook that fixed rates may experience a slight rise, while variable rates could potentially increase following a rate hike. You can find the most up-to-date mortgage rates from banks and mortgage brokers on our rates page.

Currently, variable mortgage rates are higher than fixed mortgage rates. With inflation displaying signs of returning to normal, mortgage lenders, including banks, are factoring in the possibility of lower rates within the next 5 years.

Despite the looming risk of recession, the unemployment rate in Canada remains relatively low. This economic data is likely causing delays in the expected interest rate cuts from the Bank of Canada, as low unemployment is typically associated with inflation. As of June 2023, unemployment is increasing, indicating that the interest rate hikes are achieving their intended effect.

In our July mortgage rate outlook, we predict that mortgage rates will gradually trend towards 4% in the long term. The chart below illustrates how our forecast for the 5-year variable rate has evolved over time based on the Bank of Canada's interest rate announcements.

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The primary focus of the Bank of Canada at present is to bring inflation back to its target of 2%. Variable rates are projected to rise throughout the rest of 2024 before beginning to decrease in 2024. If the Bank of Canada starts reducing rates in 2024, borrowers with adjustable rate mortgages can expect lower payments.

As of May 2023, inflation appears to be slowing due to the rate hikes implemented by the Bank of Canada. Core inflation in Canada dropped to 3.95% in May 2023, compared to 4.42% the previous month and 5.20% in May 2022. The Bank of Canada aims to achieve its 2% inflation target at a faster pace and is increasing rates to send a clear message of seriousness.

How will the recent Bank of Canada interest rate announcement impact home prices? In 2022, home prices across Canada experienced declines, bringing them closer to pre-pandemic levels in some cities. With analysts predicting a potential policy reversal from the Bank of Canada, the market may not remain subdued for long. If rates begin to decrease, it is likely that prices will quickly rebound and surpass their previous highs.

Buyers are returning, and the real estate market is witnessing increased activity due to expectations of stable rates in the short term. We believe that property prices hit their lowest point earlier this year and anticipate continued increases in the second half of 2023 and into 2024.

In May, the average home price in Toronto rose by 3.50%, according to the Toronto Regional Real Estate Board.

While borrowers may not experience lower rates for at least a year, housing prices in major cities have already started recovering from earlier lows this year. The upcoming months present an opportune time to purchase a property, and those who have been waiting should seriously consider taking action before the window of opportunity closes.

What can be expected for mortgage rates in 2024? According to financial models by Alex Leduc, Principal Broker at Perch, 5-year variable mortgage rates are anticipated to begin declining sometime in 2024.

Will mortgage rates increase over the next 5 years? Based on our latest Mortgage Rate Outlook, we anticipate that 5-year variable mortgage rates will start to decrease in 2024 and continue doing so into 2025. We will regularly update our mortgage rate forecast following each Bank of Canada interest rate announcement, and you can subscribe to our free mortgage rate forecast for the latest updates.

What is the current Bank of Canada interest rate? As of July 12, 2023, the current Bank of Canada interest rate is 5.00%, following a 0.25% rate hike.

When will the Bank of Canada announce its next interest rate? The upcoming Bank of Canada interest rate announcement is scheduled for Wednesday, September 6, 2023 at 10:00 AM Eastern Time.

What are the remaining interest rate announcement dates for 2023? In total, there are 8 interest rate announcements made by the Bank of Canada each year. The remaining dates for 2023 are as follows:

1. Wednesday, September 6, 2023
2. Wednesday, October 25, 2023
3. Wednesday, December 6, 2023

The Bank of Canada typically releases their interest rate announcements at 10:00 AM Eastern Time.