The Bank of Canada’s latest interest rate hike is a signal that more mortgage holders will be facing higher payments for a longer period of time than previously expected, as more long-term contracts continue to expire, says Rob McLister, editor of MortgageLogic.news.
“Overall, excess demand in the economy looks to be more persistent than anticipated,” the bank stated Wednesday. In February 2023, 25.6 per cent of mortgage holders were on variable terms, according to the bank, and McLister says all of them, at this point, will either have their payments increased or have their payments go entirely to interest.
Right now, five-year fixed mortgage rates are about 5 per cent, with slight variations depending on personal situations, said McLister. Back in 2019, the rates were hovering around 2.5 per cent. McLister said the rates may rise to about 5.5 per cent, following today's announcement. But University of British Columbia economist Henry Siu says there is no telling what may happen in the year ahead. What is known is what the bank is signalling, said Siu — and that’s a “macro economy that’s still running pretty hot.”
Siu said nobody can be sure of when interest rates will decline but at this point he suggests it is most likely to occur by the end of 2024.