The Bank of Canada raises to 3.75% on October 26, 2022. The 50-basis-point increase moves the announced target from 3.25%. The economy is slowing before inflation is fully contained. The new target takes effect on October 27, 2022.
The decision at a glance
| Policy measure | Announcement |
|---|---|
| Overnight target | 3.75% |
| Change | +50 basis points |
| Bank Rate | 4.00% |
| Deposit rate | 3.75% |
The economy is slowing before inflation is fully contained
Higher rates are visibly affecting housing, household spending and business demand. Weaker international growth is also weighing on exports. The Bank expects Canadian growth to stall near the end of this year and through the first half of 2023. Its annual forecast falls from 3.25% in 2022 to just under 1% in 2023, before recovering to 2% in 2024.
Despite that slowdown, the economy still has excess demand and a tight labour market. Inflation falls from 8.1% to 6.9% over three months, mainly because gasoline is cheaper. Two-thirds of consumer-price components are nevertheless rising by more than 5%, and core measures do not yet show a meaningful easing of underlying pressure.
The Bank chooses a half-point increase and still expects further increases. It is weighing the delayed effects of earlier moves against the risk that high inflation becomes entrenched. Inflation is projected to reach about 3% by late 2023 and 2% by late 2024. For households, slower growth and higher financing costs need to be considered together: a purchase budget should withstand both payment pressure and a less certain income outlook.
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, October 26, 2022. The national policy decision does not, by itself, establish a change in Greater Sudbury property values.
For context, compare the September 7 increase to 3.25% 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