Bank of Canada Raises Overnight Rate

As was widely expected, The Bank of Canada has raised the overnight rate by 0.50% today to 1.5%. This is the third Bank of Canada increase in as many meetings. Here is an article with more detail:

Bank of Canada Announcement

Today’s move came as no surprise, as inflation remains at a three decade high. The Bank continues to battle to get consumer price growth under control. In remarks accompanying today’s news, the Bank indicated that inflation continued to persist “well above” target levels and was expected to increase in the near term – meaning further rate hikes will be required. We are expecting another .25% to .50% increase at the Bank’s next meeting in July. 

We expect that the major banks will follow suit by increasing their prime lending rate by .50%, which will in turn cause all variable rate mortgages to increase by .50% in the coming weeks. The Prime rate will now sit at 3.7%. 

If you are considering locking into a fixed rate, fixed rates have, unfortunately, increased substantially in the past few months. A standard 5 year fixed rate is now hovering around 4.29% – 4.84% so locking in is less appealing at the moment. As I have said in the past, locking in or not locking in is a personal choice. There is no right or wrong answer. It all depends on your personal situation and your tolerance for risk.