Bank of Canada Rate Announcement Jul 13th, 2022

Stacey Mass • Jul 13, 2022

Bank of Canada increases policy interest rate by 100 basis points, continues quantitative tightening.


FOR IMMEDIATE RELEASE

Media Relations

Ottawa, Ontario

July 13, 2022


The Bank of Canada today increased its target for the overnight rate to 2½%, with the Bank Rate at 2¾% and the deposit rate at 2½%. The Bank is also continuing its policy of quantitative tightening (QT).


Inflation in Canada is higher and more persistent than the Bank expected in its April Monetary Policy Report (MPR), and will likely remain around 8% in the next few months. While global factors such as the war in Ukraine and ongoing supply disruptions have been the biggest drivers, domestic price pressures from excess demand are becoming more prominent. More than half of the components that make up the CPI are now rising by more than 5%. With this broadening of price pressures, the Bank’s core measures of inflation have moved up to between 3.9% and 5.4%. Also, surveys indicate more consumers and businesses are expecting inflation to be higher for longer, raising the risk that elevated inflation becomes entrenched in price- and wage-setting. If that occurs, the economic cost of restoring price stability will be higher.


Global inflation is higher, reflecting the impact of the Russian invasion of Ukraine, ongoing supply constraints, and strong demand. Many central banks are tightening monetary policy to combat inflation, and the resulting tighter financial conditions are moderating economic growth. In the United States, high inflation and rising interest rates are contributing to a slowdown in domestic demand. China’s economy is being held back by waves of restrictive measures to contain COVID-19 outbreaks. Oil prices remain high and volatile. The Bank now expects global economic growth to slow to about 3½% this year and 2% in 2023 before strengthening to 3% in 2024.


Further excess demand has built up in the Canadian economy. Labour markets are tight with a record low unemployment rate, widespread labour shortages, and increasing wage pressures. With strong demand, businesses are passing on higher input and labour costs by raising prices. Consumption is robust, led by a rebound in spending on hard-to-distance services. Business investment is solid and exports are being boosted by elevated commodity prices. The Bank estimates that GDP grew by about 4% in the second quarter. Growth is expected to slow to about 2% in the third quarter as consumption growth moderates and housing market activity pulls back following unsustainable strength during the pandemic.


The Bank expects Canada’s economy to grow by 3½% in 2022, 1¾% in 2023, and 2½% in 2024. Economic activity will slow as global growth moderates and tighter monetary policy works its way through the economy. This, combined with the resolution of supply disruptions, will bring demand and supply back into balance and alleviate inflationary pressures. Global energy prices are also projected to decline. The July outlook has inflation starting to come back down later this year, easing to about 3% by the end of next year and returning to the 2% target by the end of 2024.


With the economy clearly in excess demand, inflation high and broadening, and more businesses and consumers expecting high inflation to persist for longer, the Governing Council decided to front-load the path to higher interest rates by raising the policy rate by 100 basis points today. The Governing Council continues to judge that interest rates will need to rise further, and the pace of increases will be guided by the Bank’s ongoing assessment of the economy and inflation. Quantitative tightening continues and is complementing increases in the policy interest rate. The Governing Council is resolute in its commitment to price stability and will continue to take action as required to achieve the 2% inflation target.


Information note


The next scheduled date for announcing the overnight rate target is September 7, 2022. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR on October 26, 2022.


Stacey Mass, AMP

Mortgage Expert

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How To Get The Best Mortgage

By Stacey Mass • 08 May, 2024
If you’re looking to buy a property or have a mortgage up for renewal, and you’re thinking about connecting with your bank directly, save yourself a lot of money and regret by reading this article first. Here are four things that your bank won’t tell you, accompanied by four reasons that explain why working with an independent mortgage professional is in your best interest. Banks have Limited Access to Mortgage Products. Now, while this one may seem pretty straightforward, if you’re dealing with a single institution, they can only offer mortgages from their product catalogue. This means that you’ll be restricted to their qualifications which are usually very narrow. Working with a single institution significantly limits your options, especially if your financial situation isn’t straightforward. In contrast, dealing with an independent mortgage professional, you will have access to products from over 200 lenders, including banks, monoline lenders, credit unions, finance companies, alternative lenders, institutional B lenders, Mortgage Investment Corporations, and private funds. Working with an independent mortgage professional will give you considerably more options to secure a better mortgage. Banks Employ Salespeople, not Mortgage Experts. Banks don’t employ mortgage experts; they employ salespeople. Banks pay and incentivize salespeople to sell their products. There is a fundamental misalignment of values here. If the bank incentivizes a banker to make a profit for the bank, how can they at the same time advocate for you and your best interest? They can’t. Banks don’t have your best interest in mind. In fact, the more money they make off of you, the better it is for their bottom line. However, when you work with an independent mortgage professional, you get the experience of someone who understands the intricacies of mortgage financing and will advocate on your behalf to get you the best mortgage. It’s actually in our best interest to assist you in finding the mortgage with the best terms for you. Once your mortgage completes, we get paid a standardized finder’s fee by the lender for arranging the financing. So although we get paid by the lender, that lender has had to compete with other lenders to earn your business. When you work with an independent mortgage professional, everyone wins. You get the best mortgage available, we get paid a standardized finder’s fee, and the lender gets a new borrower. Banks Rarely Offer You Their Best Terms Upfront. Banks are in the business of making money, and they’re usually pretty good at it. As such, banks will rarely offer you their best terms at the outset of your negotiation. This is especially true if you’re looking to refinance your existing mortgage. With over half of Canadians simply accepting the renewal offer they get sent in the mail without question, banks don’t have to put their best rate forward. Instead, they rely on you to be ignorant of the process and will take advantage of your trust in them. When you work with an independent mortgage professional, we don’t play games with rates and terms. Our goal is always to seek out the lender who has the best mortgage for you from the start of the process, and if there are any negotiations to be had, we handle them for you. There is no reason for us to do otherwise. In fact, the better we do our job, the more likely it is that you’ll be happy with our services and refer your friends and family. Banks Promote Restrictive Mortgage Products. As if it’s not bad enough that banks don’t offer their best terms upfront, they actually promote mortgage products that are restrictive in nature. The fine print in your mortgage contract matters; understanding it is challenging. Banks do what they can to make it hard for you to leave. Now, if you’ve ever heard stories of outrageous penalties being charged, this is what’s called an Interest Rate Differential penalty (IRD). Each lender has its own way of calculating the IRD. Chartered banks are known for their restrictive mortgages and high IRD penalties. When you work with an independent mortgage professional, we take the time to listen to your goals and assess your mortgage needs based on your life circumstances. The best mortgage is the one that lowers your overall cost of borrowing. So not only will we walk through the cost of the mortgage financing, but we’ll also clearly outline the costs incurred should you need to break your mortgage before the end of your term. This might be the deciding factor in choosing the right lender and mortgage for you. Working with an Independent Mortgage Professional is in Your Best Interest. Banks have limitations to the mortgage products they offer. Working with an independent mortgage professional gives you mortgage options! Bankers work for the bank; they are incentivized to make money for the bank. An independent mortgage professional advocates on your behalf to get you the best mortgage available. Banks rarely offer their best terms upfront; they leave negotiations up to you. An independent mortgage professional outlines the best terms from multiple lenders at the start of the process. Banks promote restrictive mortgage products that make it difficult to leave them. An independent mortgage broker will outline all the costs associated with different mortgage products and recommend the mortgage best suited for your needs. So if you’d like to talk about the best mortgage product for you, you’ve come to the right place. Please connect anytime. It would be a pleasure to work with you.

Are You Ready To Buy A Home?

By Stacey Mass • 01 May, 2024
Buying your first home is a big deal. And while you may feel like you’re ready to take that step, here are 4 things that will prove it out. 1. You have at least 5% available for a downpayment. To buy your first home, you need to come up with at least 5% for a downpayment. From there, you’ll be expected to have roughly 1.5% of the purchase price set aside for closing costs. If you’ve saved your downpayment by accumulating your own funds, it means you have a positive cash flow which is a good thing. However, if you don’t quite have enough saved up on your own, but you have a family member who is willing to give you a gift to assist you, that works too. 2. You have established credit. Building a credit score takes some time. Before any lender considers you for mortgage financing, they want to see that you have an established history of repaying the money you’ve already borrowed. Typically two trade lines, for a period of two years, with a minimum amount of $2000, should work! Now, if you’ve had some credit issues in the past, it doesn’t mean you aren’t ready to be a homeowner. However, it might mean a little more planning is required! A co-signor can be considered here as well. 3. You have the income to make your mortgage payments. And then some. If you’re going to borrow money to buy a house, the lender wants to make sure that you have the ability to pay it back. Plus interest. The ideal situation is to have a permanent full-time position where you’re past probation. Now, if you rely on any inconsistent forms of income, having a two-year history is required. A good rule of thumb is to keep the costs of homeownership to under a third of your gross income, leaving you with two-thirds of your income to pay for your life. 4. You’ve discussed mortgage financing with a professional. Buying your first home can be quite a process. With all the information available online, it’s hard to know where to start. While you might feel ready, there are lots of steps to take; way more than can be outlined in a simple article like this one. So if you think you’re ready to buy your first home, the best place to start is with a preapproval! Let's discuss your financial situation, talk through your downpayment options, look at your credit score, assess your income and liabilities, and ultimately see what kind of mortgage you can qualify for to become a homeowner! Please connect anytime; it would be a pleasure to work with you!
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