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2023 Gets Started With A .25% Rate Increase
The Bank of Canada’s language is easing.
After the Bank of Canada’s half-percent rate increase in December, there was some hope that rates would stop rising. The Bank shifted from a stance of “yes we will increase rates further” to a “we will watch the data and decide if further increases are necessary.”
This shift in language was rather significant, but not enough to calm concerns about further increases.
Since March 2022 the bank has increased rates now 4.25%. And most of the increases have been a half percent or larger, compared to more normal quarter percent changes to the rate.
This brings the retail PRIME rate to 6.7%, with variable rate mortgages, depending on the discount from prime, somewhere around 5.8% for most variable rate mortgage holders.
Separate from this rate announcement, but related for anyone looking for a mortgage, new insured 5-year fixed rate mortgages today can be had for under 5% in most cases. This is because fixed rate mortgages change when the Bond rates change, which is different than the Bank of Canada’s rate.
What the experts are saying
In advance of the increase today, BMO Capital Market’s director and senior economist Sal Guatieri said that he sees today’s move as insurance on the inflation outlook.
When asked what to expect this year, Guatieri told BNN Bloomberg that rates have risen enough and that the economy will enter a shallow recession in the first half of this year. He expects the Bank to sit on the sidelines for the balance of the year and then in 2024 start to reverse gears with rate drops.
And I am excited to tell you that the bank thinks this will be the last increase! They said that “If economic developments evolve broadly in line with [their] … outlook, [the Bank] expects to hold the … rate at its current level while it assesses the impact of the cumulative interest rate increases. “
Based on the major banks predictions I think we will see rates more or less where they are today until the end of 2023 and back to about 4% by the end of 2024.
Alberta’s real estate market remains strong. In the lower priced part of the market, Realtors are reporting multiple offers, and less flexible sellers. We didn’t have the price increases seen elsewhere in the country and are not expecting much more downward pressure on prices in our province. Both Calgary and Edmonton remain some of the most affordable major housing markets in the developed world.