The Bank of Canada raises to 0.50% on March 2, 2022. The 25-basis-point increase moves the announced target from 0.25%. The first increase meets a new inflation shock. The new target takes effect on March 3, 2022.
The decision at a glance
| Policy measure | Announcement |
|---|---|
| Overnight target | 0.50% |
| Change | +25 basis points |
| Bank Rate | 0.75% |
| Deposit rate | 0.50% |
The first increase meets a new inflation shock
The Bank raises its target by a quarter point as Canada emerges from Omicron with strong demand. Fourth-quarter GDP grows at an annualized 6.7% pace, above the Bank’s projection. Household spending is resilient and housing activity is exceptionally strong. Although January restrictions temporarily disrupt employment, the Bank sees the recovery regaining momentum.
Russia’s invasion of Ukraine adds a major new source of uncertainty. Higher oil and other commodity prices will lift inflation, while supply disruption and weaker confidence could reduce growth. The effects pull in different directions for Canada: some exporters benefit from higher commodity prices, while households face higher fuel and food costs.
Inflation is 5.1%, with price increases becoming more widespread and core measures rising. The Bank signals that further increases are likely and is considering when to begin shrinking its bond holdings. For a variable-rate borrower, the immediate question is how the lender adjusts prime and how the mortgage contract handles that change. For a fixed-rate borrower, the impact is usually through new offers or renewal rather than an automatic change to the existing rate.
What this means for a mortgage
The overnight target influences short-term borrowing costs, including lender prime rates. Variable mortgages and home-equity lines of credit are more directly exposed to prime-rate changes. Fixed mortgage offers also depend on bond yields, funding costs, the term and lender competition; they can move even when the Bank holds.
Posted-rate context: The Bank of Canada weekly observation for February 23, 2022 gives the rates below. They are typical posted rates at six major chartered banks, not discounted offers or a quote for your mortgage. The observation comes before today’s policy decision; ask a lender for its current rates before deciding. Source: Bank of Canada weekly posted-rate series.
| Posted reference | Rate |
|---|---|
| Prime | 2.45% |
| One-year conventional mortgage | 2.79% |
| Three-year conventional mortgage | 3.49% |
| Five-year conventional mortgage | 4.79% |
Payment illustration: a $300,000 mortgage amortized over 25 years at the 4.79% posted five-year rate is approximately $1,709 per month for principal and interest, using Canadian semi-annual compounding. This is an illustration, not a lender quote. Taxes, insurance, utilities, closing costs and qualification requirements are separate.
Put the announcement into a Greater Sudbury plan
Buying or renewing
Ask for written figures using your balance, down payment and amortization. Compare payment mechanics, prepayment options, penalties and the cash left after closing. A variable mortgage with fixed payments may change how much principal you repay instead of changing the payment immediately; the contract determines the result.
Preparing to sell
Financing affects what buyers can carry, but it does not set one price for every home. Compare recent sales and active alternatives in the same neighbourhood and price range. Condition, carrying costs, presentation and offer terms remain central to the decision.
Official announcement: Bank of Canada, March 2, 2022. The national policy decision does not, by itself, establish a change in Greater Sudbury property values.
For context, compare the January 26 hold at 0.25% with today’s decision.
For a local plan, explore the Buyer Experience or Seller Experience.
Expect Moore for Your Real Estate.
— Chad Moore, REALTOR®
— Lake City Realty Ltd., Brokerage