Bank of Canada Interest Rate Update - March 2023

To our valued clients,

The Bank of Canada met this past week for the second meeting of 2023, and have made the decision to leave rates where they are. This is the first time in 12 months that variable rate mortgage holders have not seen an increase in their rate and monthly payment, and comes as a huge relief.

The Bank has outlined that we are not there yet and do still have a ways to go before we get back to our neutral range, however the data is starting to look more promising. Their hope, as outlined in the policy report, is that we should see inflation at about 3% by mid 2023 and back to its 2% neutral range sometime in 2024.

While this recent announcement has provided some relief, we are still expecting rates to remain elevated for the next 1-2 years while the Bank of Canada can monitor the impacts of the hikes and our inflationary data. Rates will not necessarily drop immediately once we reach that 2% target, and The Bank has reminded us that this is a conditional pause and they are prepared to increase rates further, if needed. As such, my top recommendation is to ensure your financial house is in order so that you are better able to weather this storm, and I am here to help you through this. Please don’t wait to reach out to me until it’s too late. If you have any high interest debt or are struggling with your payments, I am here to help.

To read the full report on yesterday's announcement, please click HERE

We are continuing to keep an eye on the most recent news of the US Silicon Valley Bank collapse which occurred Friday last week and have sent bond yields plummeting. When bond yields drop, fixed rates for mortgages will generally follow shortly thereafter, however I do not foresee this happening right away in this case. I will update you as we learn more about how this incident in the US will impact Canadian mortgage rates. Stay tuned for more on this....

What does this rate announcement mean for you?

NO CHANGES FOR ANYONE! No changes for both fixed and variable rate mortgage holders this month.

If you are in a "fixed payment - variable interest" product...

And your payments have not changed over the past 12 months, then you have likely hit or passed your "Trigger rate". It is important that you understand the consequences of this, so please reach out to me so that I can explain your specific situation and my recommendation for what to do.

Should I lock-in my variable rate now?

Locking-in your variable rate continues to be a difficult topic to advise on as it's impossible to say exactly where rates will go over the next 1-2 years, there is still a lot of uncertainty. This recent US bank collapse is a good reminder of the unknown future events that can disrupt any "plan". But, if locking-in to a fixed rate is something you are considering you may want to consider a 2-3 year fixed rate, which can offer you the fixed comfort today while still being able to renew at a time when rates are (hopefully) lower. These shorter term fixed rates generally come with a lower penalty and more flexibility to make changes in the future.

As mentioned in previous emails, I have 3 properties and all 3 of my personal mortgages are still in variable rates, with no plans to change that. Although rates are expected to remain elevated for the next 1-2 years, the expectation is that they will start to soften sometime after 2024. I am not personally comfortable locking-in to an inflated fixed rate for 5 years, as well as into a product which is highly restrictive, so I am staying variable personally. However, if a fixed rate product will help you sleep better and ease your stress at this time then please let me know, let’s talk about options.

What am I suggesting?

1) If you have any high interest debt right now, we need to pay that off and get you locked-in to a low and affordable monthly payment. If you are struggling, please reach out before it's too late.

2) If you are in a 'fluctuating payment - variable product' with a low remaining amortization, one strategy to consider is to increase your amortization temporarily to make your monthly budget more comfortable.

3) If you are comfortable with your payments, and budget is not a concern right now, then we should talk about accessing some equity from your home so that you can invest during this period of time. Investing in the stock market and/or in the real estate market while prices are low is how smart investors earn their wealth. There may be opportunities right now, and many of our clients are sitting on a large amount of equity in their homes to make this happen.

4) And as always:

If you are comfortable with the variable rate and fluctuating payment, then my suggestion is to stay put. And I am here to support you and help to strategize how you are best to ride this out.

I want to lock-in to a fixed rate, what do I do now?

Contact your lender directly and ask them what rate they will offer you to lock-in. Request all terms available to you, including 2 or 3 year rates if possible. Once you have that information if you would like our help, send it to me and I will help you with a strategy.

Our team is here to support you for any and all your mortgage and real estate needs, we look forward to hearing from you.

I hope you have a beautiful day.