Canadians consider the market forecast for mortgages before they proceed with the mortgage application. You might work with the top mortgage agent in Kingston, but even they don’t have control over the staggering interest rates.
The Bank of Canada sets the benchmark rate, based on which the other banks decide their interest rates. It’s the minimal interest rate that a bank can charge its borrowers. If the Bank of Canada makes any change to the benchmark rate, the interest rate changes across all banks in the country.
Knowing the mortgage rate beforehand can save you hundreds of thousands of dollars in interest payments in the future. In this post, we are going to discuss the mortgage rate forecast for 2023. Keep reading!
Canadian Mortgage Rate
The Bank of Canada dropped the benchmark to near-zero in the midst of the COVID pandemic to stabilise the economy’s condition. The main purpose of this policy was to encourage consumers to spend more and help in the economy’s recovery. While the government achieved its goals, the near-zero benchmark rate had a negative impact on the economy. There was a sudden spike in inflation.
Ideally, the inflation rate in an economy goes hand in hand with the benchmark rate. But, Canadians witnessed inflation going over 7%, while the benchmark rate was considerably lower. In order to control inflation, the Bank of Canada had to increase the benchmark rate. This explains the hike in interest rates in the last two years.
The Bank of Canada declared a hike in the interest rate by 0.25% in March 2022. That was just the beginning. A month later, they raised the interest by 0.50%. They added another 0.5% in June 2022. The interest went up from near zero to 2.5% in July.
They raised the interest by 0.25% every month for the next few months. They had recently declared the final interest rate hike of 0.50%, which brings the mortgage rate to a staggering 4.25%. As of now, the mortgage rate in Canada is 4.25%, which is pretty high for those considering residential mortgage services in Kingston, Ontario.
Experts believe that the Bank of Canada might further raise the benchmark rate by another 0.25% in January 2023, bringing the total to 4.50%.
Getting Mortgage Services in Canada: Here’s What You Should Know
When considering a mortgage, you must decide between fixed-rate or variable-rate interest. Variable rates are suitable for those who are willing to take risks, but there’s a chance you might end up paying more than you signed up for.
The rates fluctuate based on the benchmark rates set forth by the Bank of Canada. On the other hand, a fixed-rate mortgage has a stable interest rate, which remains the same for the entire duration of your mortgage payments, irrespective of the interest rate fluctuations. It’s important to find the top mortgage agent in Kingston and work with them to find a reasonable deal.
Get in touch with Leo Ragusa to learn more about current mortgage rates and how to become eligible for a first-home owner mortgage.