On Wednesday, the Bank of Canada hiked its key policy rate by 25 basis points to 4.5 per cent – the highest level in 15 years. The Canadian central bank indicated it would pause its hiking cycle if economic conditions remain stable, as it pursues its goal of bringing decades-high inflation back to a target level of two per cent.
“The bank believes this is as much tightening as we need to get inflation back on track, and everyone who's got a mortgage should hope they’re right.” Chandra said interest rates are already affecting the housing market – a sector that typically feels some of the first impacts of interest rate policy – but it’s a “positive” that the central bank could be at the end its eight-month hiking cycle.
“It's a guarantee that a minority of homeowners with a mortgage, particularly a floating rate mortgage, are going to have to sell because they can't make their payments,” he said. Another unknown variable in the mix is when exactly the central bank will start cutting interest rates as inflation comes down.
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