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On September 7th, the Bank Raised interest rates for the 5th consecutive time, by an additional 75 basis points, bringing the rate to the highest point since the 2008 global financial crisis. This brings the retail prime lending rate from 4.7% to 5.45%. Variable rate mortgages are generally offered at 0.9% below that, so variable rate holders will now see their interest rates, and in most cases, their payments, rise to about 4.55% depending on the discount. This brings variable rate mortgages to about the same rate as discounted 5-year fixed rate mortgages.

Well, back in July, the bank told us that this would be coming, and most economists expected the rate to rise by 1% more before the end of the year. The biggest question was how quickly. Now it appears that 1% estimate was a bit low and we will see a bit more increase before the year is over.

The bank tells us that Global inflation remains high and measures of core inflation are still moving up in most countries. In response, central banks around the world continue to tighten monetary policy.

The bank attributes the now 6-month long war in Ukraine, ongoing COVID-19 lockdowns in China and volatile commodity prices as the main drivers of elevated global inflation. But of course, elevated consu