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Pattie Lovett-Reid

Chief Financial Commentator, CTV


The Bank of Canada delivered pretty much exactly what Bay Street expected Wednesday by scaling back its quantitative easing program and leaving its benchmark interest rate at 0.25 per cent. However, I would argue there was a big surprise for Canadians who have been counting on rates staying put into 2023.

To be fair there is good news here: the resiliency that our economy has been showing resulted in the Bank of Canada upgrading its growth projections to 6.5 per cent this year and 3.75 per cent next year. Along with these changes, it also pulled forward its call on when economic slack will be absorbed from sometime in 2023 to the second half of 2022.

This translates into rates potentially heading higher sooner than previously planned. Gone is the signalling for a Bank of Canada on hold into 2023. Now, the central bank is indicating rates could rise in the second half of next year.

And I would argue that if economic growth continues, job numbers improve and commodity prices tick higher, that rate-hike timeline could be moved up even further.

What does this mean to you? Simple: borrower beware.

Housing markets have been blistering hot in many parts of the country; some industry insiders have attributed that to what was viewed as a tacit guarantee that the Bank of Canada would be on hold until 2023. If you take that guarantee away, it is reasonable to expect fixed mortgages will begin to drift higher and it isn't great news for anyone in a variable rate mortgage.

According to James Laird, co-founder of and president of CanWise Financial, now is a good time for anyone in a variable rate mortgage to consider locking into a fixed rate mortgage.

I have long worried about Canadians believing this low interest rate environment was here indefinitely and who may have naively thought rates wouldn't head higher when the economy warranted it.

In my opinion, the latest update from the Bank of Canada is an indirect warning: as the economy gets itself back on the right trajectory, the window is closing for Canadians to do the same.