Variable-rate holders have room for optimism on next BoC move: CEO

Canadians with variable-rate mortgages or home equity lines of credit can expect a rate hold from the central bank this week, which would fuel their “cautious optimism” that there will be no further rate hikes this year, according to Ratehub.ca.

“It is widely expected that the Bank of Canada will hold rates [this] week due to [the latest] lower-than-expected inflation numbers,” said James Laird, co-CEO of Ratehub.ca. “It is possible that there will be no further rate hikes in 2023.”

On the other hand, Canadians who are looking for fixed-rate mortgages should hope harder, “because depending on the bank’s policy announcement and commentary [this] week, bond yields could push up further, which will cause fixed rates to follow.”

Laird said that all indicators point to the BoC “hoping to be finished” with its rate-hike campaign – and “they will be unless they are surprised by future incoming data,” he noted.

“Forecasting has been notably difficult for the Bank over the last 12 months, given there is still a lot of volatility in the economy,” Laird added.

“Higher rates are affecting the real estate market. The CREA home price index for September showed values ​​​​were down in all major markets and listings are building.”

The possibility of a BoC hike remains

With headline inflation remaining sticky at a 3.7% annualized pace in September, the central bank has yet to outright dismiss the possibility of further hikes.

BoC Governor Tiff Macklem has said that while the 5% policy rate has helped rein in the inflation rate over the last few months, the central bank remains concerned that progress has slowed in that area.

“Our 2% target is now in sight… [but] monetary policy still has work to do to restore price stability for Canadians, and we are committed to staying the course,” Macklem said in a recent speech to the Calgary Chamber of Commerce.

He warned that overall inflationary pressures are persisting.

“Larger-than-normal price increases remain broad-based across the goods and services Canadians buy regularly,” Macklem said. “In trying to balance the risks of under- and over-tightening, the Governing Council decided [on September 6] to keep the policy rate at 5% and agreed there may be a need to raise the policy rate further if inflationary pressures persist.”