The Bank of Canada raises to 2.50% on July 13, 2022. The 100-basis-point increase moves the announced target from 1.50%. A full-point increase aims to get ahead of inflation. The new target takes effect on July 14, 2022.
The decision at a glance
| Policy measure | Announcement |
|---|---|
| Overnight target | 2.50% |
| Change | +100 basis points |
| Bank Rate | 2.75% |
| Deposit rate | 2.50% |
A full-point increase aims to get ahead of inflation
The Bank raises its target by 100 basis points, choosing to deliver more tightening immediately. Inflation is higher and more persistent than it expected in April and is likely to remain around 8% in the coming months. More than half of consumer-price components are rising by over 5%, while core measures range from 3.9% to 5.4%.
Strong domestic demand is adding to global supply and commodity pressures. Unemployment is at a record low, labour shortages are widespread and businesses can pass higher costs through to customers. The Bank estimates second-quarter growth at about a 4% annualized pace, slowing to roughly 2% in the third quarter as consumption moderates and housing pulls back.
Surveys show more households and businesses expecting inflation to stay high. The Bank wants to prevent those expectations from shaping wages and prices permanently. It forecasts Canadian growth of 3.5% in 2022 and 1.75% in 2023, with inflation returning to 2% by late 2024. Further increases are still expected. Buyers should revisit approvals promptly, while sellers should recognize that a larger financing shock can change what otherwise interested buyers can carry.
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.
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, July 13, 2022. The national policy decision does not, by itself, establish a change in Greater Sudbury property values.
For context, compare the June 1 increase to 1.50% 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