Bank of Canada increases interest rate to 4.5%
After seven rate hikes last year, the Bank of Canada’s first interest rate update for 2023 is out.
The central bank announced another 25 basis-point increase on Wednesday at 10 am ET, taking the current interest rate from 4.25% to 4.5%.
Since the Consumer Price Index fell to 6.3% in December, some experts had predicted a rate hold. Canadians are hoping this will be the last rate hike for a while, and only rate holds will follow for the rest of the year.
Bank of Canada increases policy interest rate by 25 basis points, continues quantitative tighteninghttps://t.co/4f0sbVBQtC#economy #cdnecon
— Bank of Canada (@bankofcanada) January 25, 2023
The Bank of Canada continues to say that these growing interest rates are a result of, and a remedy for, inflation. Some are skeptical, saying the Bank should allow enough time to let previous interest rate hikes help curb inflation. Others welcome these rate hikes.
Maybe let the last 8 hikes work their way through the economy. You have a history of over stepping and retreating like Olympic Backpeddlers.
— Jeff Barber (@dontfollowbarbs) January 25, 2023
Low interest rates and high inflation have sestroyed people’s lives and savings. About time BoC take decisive action against inflation and raise interest rates aggressively. Low rates are inflating asset bubbles.
— Dr. Julab Gamun (@RealSalluKhan) January 25, 2023
What a 25-point increase means for you
According to Ratehub.ca’s mortgage payment calculator, a homeowner who put a 10% down payment on a $626,318 home with a five-year variable rate of 5.3% amortized over 25 years (total mortgage amount of $581,160) has a monthly mortgage payment of $3,480.
With the 25-basis point rate increase today, this homeowner’s variable mortgage rate will increase to 5.55% and their monthly payment will increase to $3,564.
This will result in the homeowner paying $84 more per month — or $1,008 per year — on their mortgage payments.
In this case, the home price of $626,318 is based on December 2022 averages calculated by the Canadian Real Estate Association (CREA).
Have rising interest rates impacted your decisions or aspirations about buying a home in Canada? Let us know in the comments.
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