Even with hikes, mortgage rates remain low

May 5, 2022

The Bank of Canada (BoC) warned it is prepared to raise interest rates “forcefully” to help tame inflation, including higher housing prices.
But even with hikes, mortgage brokers note mortgage rates will remain among the lowest in history.
“The economy needs higher rates and can handle them. With demand starting to run ahead of the economy’s capacity, we need higher rates to bring the economy into balance and cool domestic inflation,” said Bank of Canada Governor Tiff Macklem.
He suggested rates at the June 1, 2022 setting could increase as much as 0.5 per cent, bringing BoC’s bellwether rate to 1.5 per cent.
Macklem noted inflation is now at a three-decade high of 6.7 per cent and is expected to remain above the BoC’s target range of 1 per cent to 3 per cent for the remainder of 2022.
“We are committed to using our policy interest rate to return inflation to target and will do so forcefully if needed,” he added. “How high rates go will depend on how the economy responds and how the outlook for inflation evolves.”
According to official forecasts from major banks, BoC rate will be from 2 per cent to 2.5 per cent by the end of 2023. Scotiabank is the only major bank predicting a 3 per cent BoC rate.
The current five-year mortgage rate averages 4.80 per cent, but it was 5.24 per cent 10 years ago and 6.85 per cent 20 years ago, according to a survey by mortgage broker Super Brokers.