The Bank of Canada holds interest rates at 5%

The Bank of Canada has decided to keep its overnight rate target at 5% today.

Canada’s inflation rate rose to 3.3% in July, up from 2.8% in the previous month, and it’s anticipated to hover around the three percent mark in the coming months.

The central bank was widely predicted to keep its key rate steady because there’s increasing evidence that higher interest rates are having a dampening effect on economic activity.

The Governing Council decided to keep the policy interest rate at 5% because recent evidence suggests that the excess demand in the economy is decreasing. They also plan to continue normalizing the Bank’s balance sheet.

The next update on the overnight rate target is scheduled for October 25, 2023, along with a detailed economic and inflation report, including potential risks.

When the Bank of Canada maintains or changes its key interest rate, it can have implications for your mortgage:

  • Variable or Adjustable-Rate Mortgages: If you have a variable or adjustable-rate mortgage, your interest rate and monthly payments are directly tied to the central bank’s overnight rate. If the central bank holds the rate steady, your mortgage payments will remain the same. However, if they raise it in the future, your mortgage payments could increase, leading to higher borrowing costs.
  • Fixed-Rate Mortgages: Fixed-rate mortgages are not directly affected by changes in the central bank’s key rate during the term of the mortgage. Your interest rate and monthly payments are locked in for the duration of the fixed term. However, when it’s time to renew your mortgage or if you plan to refinance, you might face higher interest rates if the central bank has raised rates in the meantime.
  • New Mortgages: If you’re in the market for a new mortgage, the central bank’s rate decisions can influence the interest rates offered by lenders. When the central bank holds or increases rates, lenders may adjust their mortgage rates accordingly, potentially leading to higher borrowing costs for new mortgages.
  • Budget Considerations: It’s crucial to review your budget and financial plans when interest rates are affected. Ensure that you can manage any potential increases in your mortgage payments.
  • Refinancing: Depending on your financial situation and objectives, you might consider refinancing your mortgage to lock in a lower rate if you’re concerned about further interest rate increases. However, refinancing comes with costs, so it’s essential to evaluate whether it makes financial sense for your specific circumstances.

To fully understand the impact of the Bank of Canada’s rate decisions on your mortgage, it’s advisable to consult with us. We can provide you with personalized guidance based on your mortgage type, financial goals, and the current interest rate environment.

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