Today, January 25, 2023, the Bank of Canada has raised its target for the overnight rate to 4.50%.
The policy settings
| Measure | Setting | Why it matters |
|---|---|---|
| Target overnight rate | 4.50% | Anchor for the Bank's monetary-policy stance |
| Change at this decision | 25-basis-point increase | Most direct signal for variable-rate borrowing |
| Bank Rate | 4.75% | Rate charged on one-day advances to financial institutions |
| Deposit rate | 4.50% | Rate paid on deposits held at the Bank |
Why the Bank makes this choice
Growth and jobs. Canada is still operating with excess demand and a very tight labour market, even as household spending and housing activity respond to higher borrowing costs.
Inflation. December CPI is 6.3%, down from the 8.1% peak, while core inflation is still close to 5%; the Bank projects CPI near 3% by mid-year and back to 2% in 2024.
The policy judgment. After December’s increase to 4.25%, persistent demand pressure leads to another 25-basis-point rise. The Bank now says it expects to hold at this level if the economy develops broadly in line with its forecast, while leaving room to raise the rate again if needed.
What changes for borrowers
Variable-rate borrowers should expect lenders to translate the higher policy setting into prime-rate pricing. The immediate question is the payment rule in the mortgage contract: some payments move, while some remain fixed until a trigger threshold is reached.
A 25-basis-point change equals about $83 per month in simple interest on a $400,000 balance if the full change passes through. That is a scale marker, not a mortgage quote: amortization, payment structure, timing and lender terms change the actual result.
When comparing fixed and variable products, look beyond the starting rate. Payment structure, prepayment privileges, portability, penalties and conversion terms affect the cost of changing plans. Ask a lender or licensed mortgage professional to calculate the result for your balance and expected time in the home.
For Greater Sudbury buyers
If you are buying in Greater Sudbury, I would start with three numbers: a comfortable monthly housing cost, a purchase-price ceiling and the cash left after closing. Two homes at the same price can carry very different costs once taxes, heating, insurance, condo fees and immediate repairs are included. Use comparable sales and available alternatives to test the price of the specific property.
- Refresh the pre-approval and confirm the rate-hold expiry.
- Test the payment at the offered rate and a higher renewal rate.
- Keep closing costs and a repair reserve separate from the down payment.
- Match financing and inspection conditions to the property’s actual risks.
For owners approaching renewal
Compare equivalent offers before deciding whether to stay with the current lender. Include discharge charges, appraisal or legal requirements and the flexibility you may need during the term. Extending amortization may lower the payment while increasing total interest and slowing principal repayment. A sustainable structure matters more than correctly guessing the next announcement.
For sellers
The rate decision can influence buyer confidence and financing, but it does not automatically reset Greater Sudbury prices. I would position the home against current competition and recent relevant sales. Resolve avoidable objections, make the carrying costs and condition clear, and use actual showing and offer feedback to guide adjustments.
What to watch next
Whether weaker spending, easing supply constraints and the cumulative rate increases bring inflation down without another hike. Those developments will help show whether the Bank’s assessment is holding up. A household plan should still work under more than one rate or market outcome.
Read the official Bank of Canada announcement.
For a local plan, explore the Buyer Experience or Seller Experience. You can also browse the Bank of Canada Decisions & Mortgage Rate Context Archive.
Expect Moore for Your Real Estate.
— Chad Moore, REALTOR®
— Lake City Realty Ltd., Brokerage