What can Canadians expect from the Bank of Canada's next announcement?

Another rate increase would have big implications, says Ratehub.ca co-CEO.

Canadians should be hoping hard for a rate hold by the central bank next week, according to James Laird, co-CEO of Ratehub.ca.

“Borrowers should be budgeting for a rate hike so that they are prepared if it does happen,” Laird said. “The bank chose to raise at the last two announcements, so a raise is certainly still on the table.”

Any further upward movement in the central bank’s policy rate, which is already at a multi-decade high of 5%, will especially affect Canadians holding or looking for fixed-rate mortgage products.

“Depending on the bank’s policy announcement and commentary next week, bond yields could push up further, which will cause fixed rates to follow,” Laird said.

Meanwhile, “anyone with a variable rate or a home equity line of credit (HELOC) will be hoping for a hold next week and guidance that further rate hikes are unlikely,” he added.

“If rates go up further, it will put downward pressure on home values which have plateaued over the summer. On the other hand, if the bank chooses to hold, it could cause buyers to come off the sidelines, thereby increasing demand.”

This is a trend that the market can hardly afford right now, Laird warned.

“If the bank chooses to hike rates further, the stress test will increase, making homes harder to qualify for,” he

Despite avoiding a crash, signs indicate aggressive rate hikes by the Bank of Canada and the Federal Reserve are impacting economic strength.

What if the BoC hikes on September 6?

Ratehub.ca calculated that if the central bank announces a 25-basis-point increase on its meeting next week, home owners who have put a 10% down payment on an average priced home as of July 2023 (valued at $668,754 per the Canadian Real Estate Association) with a five-year variable rate of 5.95% on a 25-year term will have a total mortgage amount of $620,536 and an estimated monthly mortgage payment of $3,952.

For variable mortgages, a 25-bps rate increase on September 6 will push up the variable mortgage rate to 6.20%, accompanied by an increase in monthly payment to $4,044.

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