Bank of Canada 0.75% increase – Sept 2022

Good morning,

The Bank of Canada raised another whopping 0.75% at this morning’s rate announcement, making a total of 3% in the last 6 months & leaving the door open for more rate increases.  This has been a massive move in a short period of time & based on their announcement we may not be out of the woods yet. 

GDP is weaker than projected with the last 2 month’s readings being 0% & -0.1%.  Growth has clearly turned.  Housing continues to pull back across the country however inflation is still high at 7.6%.  The target is 2%.  We’re a clearly a ways off from that so the question is, are we going to see the Bank of Canada continue to march up rates until inflation starts with a 2?  They could have raised rates by 3% this morning & next month’s reading still wouldn’t be close to 2%.  Is the plan to talk aggressively to decrease how much further action they’re going to take?

2 weeks ago Tiff Macklem who heads our Central Bank published a special in the National Post, which is not normal & points to how much anxiety is out there. 

In that piece Tiff highlighted that inflation appears to have peaked but that it also remains far too high & will likely remain too high for some time.  He continued that they need to tame inflation back to 2% by raising borrowing costs in the “short term.”  They don’t want to choke off demand, but slow it’s growth for what they call a “soft landing.”

How much confidence do you have in the same people who are largely responsible for the high inflation we’re experiencing today, who were clueless as it ramped up, refrained from doing anything while inflation was accelerating all last year, to be able to artfully land this ship without triggering a recession?  Inflation hasn’t been at 2% in over 1.5 years & they did nothing for the bulk of that. 

I thought I’d go back over the recent history of Central Bank messaging & highlight some of the statements to give an idea of the type of accuracy we can expect here:

When Covid hit, Tiff Macklem said (a number of times) that they didn’t plan on raising rates until well into 2023, to be assured that we will have low borrowing costs “for a long time” & suggested to anyone “considering making a major purchase (… or) investment, you can be confident rates will remain low for a long time”.

It’s not 2023.  Rates are not low. 

In the 2nd half of last year, while inflation was ramping up, their statements highlighted that inflation was going to be temporary & that even though it was above their 2% target, that was “as expected.”

As recently as December of 2021, while inflation continued to ramp up, they stated that inflation would be back to 2% by late 2022.

One month later at their January 2022 meeting that changed to inflation will decline “reasonable quickly to about 3% by the end of this year.”

Two months following that statement inflation was all of a sudden not a temporary phenomena & actually a problem & so began the rate hikes.

Those comments haven’t aged well & all but the 1st aren’t even a year old!

So what to do with your variable rate mortgages?  CIBC came out last week stating they think this will be the final rate increase we see but if you take Tiff at his word, we have more rate hikes to come.  The Bank of Canada has highlighted recently that they are “front loading” the rate hikes & in the post called attention to the hikes being short term but what are you to believe? 

If you’re in a variable, you can always lock in but the question is if it’s worth locking into a fixed rate of 4.5% – 5% to avoid having your variable cross that threshold for, say, 6 months?  For 12?  Are you OK giving up the option of benefitting when rates do eventually drop? 

Variable rates have only really been going up for 6 months & only recently have crossed the threshold of being more expensive per month than if you had gone with a fixed rate for most variable rate mortgages.

Would you have felt the same pain or anxiety you feel now if you had taken a fixed rate right from the get go & had been paying considerably more being in a fixed for the past many years while the variable has been lower? 

Feeling safer comes with a premium.  Feelings should never drive financial decisions.

I’m going to highlight some action points below if you are a in a variable but please do reach out to me today if you would like to discuss any of this. 


Lock into a fixed rate around 5% depending on the term with no cost to do so:


-piece of mind


-not being able to benefit from potentially lower rates in the future  (when rates drop fixed rate penalties get expensive)

-taking on significantly higher penalty risk

If you’re in a fluctuating payment variable rate, switch into a fixed payment variable rate & extend the amortization back up to the max


-with fixed payments your cash flow will not be impacted by the rate changes as your payments are fixed (but the amount that goes towards principal/interest will fluctuate as rates change)

-when rates do eventually drop you will pay your mortgage off quicker as more of your payment will then go towards principal vs interest


-will incur a small 3 months interest penalty

-will not be able to benefit with lowering payments from dropping rates

Move into a 1 year fixed rate term


-payment/rate security to ride out the current rate volatility

-not locking into a long term at a time where rates are just below the peak & hopefully renewing that mortgage in a year’s time where rates should be lower than today.


-will incur a 3 months interest penalty

-cannot benefit from lower cash flow with lower payments until renewal

Bank of Canada 0.5% rate increase – June

Good morning,

The Bank of Canada followed through with their 3rd increase of 2022 & raised rates by 0.5% at this morning’s rate announcement. That brings the total number of increases to 1.25% on this rate hike cycle & the same total amount as the last rate hike cycle in 2018. There are additional rate hikes being priced in for this year & the way things look now another 0.5% increase at the July meeting is looking likely.

I know for a lot of people, reading that tends to result in the knee jerk reaction of wanting to lock into a fixed but keep in mind, doing that is locking in another 1.5%+ rate hikes right away & takes on a significantly higher penalty risk if you break your mortgage early.

Psychology is a funny thing as, from the conversations I have with clients, many people tend to think that if your variable rate ends up getting to the same level as the fixed rate, then it’s been a mistake.. the reality is it’s still been a good move as you’ve saved on the way up. For a variable to end up costing more over your term it would have to continue rising & stay there. 

The ”stay there” is the key piece.  If you look at past rate hike cycles you’ll see that anytime we’ve seen sharp rate increase like we’re seeing now, it tends to result in rates falling just as sharply & roughly a year after the rate hikes started.  


It’s called variable for a reason. What goes up, goes down & what goes up quickly, comes down quickly as the shock has a more significant impact.

I wanted to take a step back here & put into context what has happened over the last 2 years because a lot of people like to lean on the forecasters. The Bank of Canada in 2020 said repeatedly that it would not raise rates until 2023. How many people based major financial decisions around that guidance?

While they were saying that, our federal government was flooding record amounts of stimulus into the bank accounts​​​​ of Canadians & I think we all heard no shortage of stories of cheques that went out to people or companies who frankly, didn’t need it.

So we had record low borrowing rates, free money flying around & of course that turbo charged demand, all at a time where lockdowns & restrictions wreaked havoc on supply chains.  The Bank of Canada said repeatedly they intended to let inflation “run hot.”

All of last year inflation started to build, and build and build. In the face of the highest inflation reading in nearly 2 decades, the Bank of Canada left rates unchanged at their January meeting. Then, the rush to play catch up & come in hot & heavy with 50bps hikes.

The thing with high prices is that they are cured by high prices. Meaning, high prices take away from the potential to spend elsewhere in the economy so demand suffers. As demand goes down, so eventually will prices. Canada’s GDP for Q1 came in well below expectation at 3.1%, compared to 6.6% last quarter. 

Growth is slowing.  Add on to that how mortgage costs have doubled this year & you have a recipe for recession. It’s not a question of if.  It’s a question of when.

Bank of Canada 0.5% Rate Increase – April 2022

Wow, the last month has been one of the craziest I’ve seen in my 12 years doing this job. The Bank of Canada raised rates by 0.5% at this morning’s interest rate announcement.  Big move. 

The last month saw the biggest jump in fixed rates in over 30 years with most lenders in Canada now above 4% for a 5 year fixed.  All the worst expectations for inflation & rate hikes seem to be priced in but it’s important to remember where we are in the business cycle & how that can impact some of these wild rate hike expectations.

Before we get into it, remember, if you’re in a fixed rate.  Today’s move doesn’t directly impact your mortgage.  You’re locked in.  What I would suggest, though, is starting to think about your payments at renewal & what you can do to prepare for that.  Get in touch with me to discuss strategies to brace for that.

If you’re in a variable rate, it’s important to keep in mind you’re still saving a significant amount vs locking in here.  Even with a 0.5% jump today, locking in would mean a rate likely around 1.5% more than you’re in currently.  We’re going to get more rate increases, but remember that the variable only costs more if rates rise by not only that much, but more & stay there..

Let’s talk about inflation.  Inflation tells us what happened, not what’s going to happen.  Prices have been accelerating upwards for over a year.  While our central bankers were telling us it’s not an issue, transitory was the word often used, & would ease by the end of this year, it was ripping.  They explicitly wanted it to run hot & now, after keeping rates at record lows & lower than they should have been all the way up until last month, it’s hot.  The question is, will it continue to stay hot? 

Inflation is a rate of change measure.  It was March of last year when inflation started picking up so due to higher base effects, it will be a steep hurdle for CPI to continue these high prints moving forward & not start to come down.  We would need something like oil alone to avg around $150 / barrel for the entire month.  It’s already dropped approx. 20% from last month’s high. 

The other piece to weigh into this is demand destruction.  With fixed mortgage rates over 4%, will house prices continue to rip to the upside?  The real estate market in Canada appears to have peaked last month as higher rates started to be felt.  With gas & energy prices eating into disposable income, will consumers have the same firepower to put cash into renovating homes, buying cars, taking vacations, etc. ?  No.  In a lot of ways, the bond market & higher costs are doing the Bank of Canada’s work for them in slowing growth & cooling things down.

So inflation tells us about the past, what do the forward looking indicators suggest we can expect?  All signs suggest to central banks tightening & raising rates late in the cycle & into an already forming slowdown.  A recipe for a recession.

In the US, a famously reliable indicator of a recession within the next 2 years is the spread on the 10 year & 2 year bond yields.  The spread inverted which means the long bond has a lower yield than the short term bond.  That means rates are going to go up & then come down.  Central banks rising rates is going to break things.  Personally I would be shocked if they get anywhere near the rate hike expectations this year without triggering a recession by the end of the year. 

Consumer cyclical stocks are down approx. 20%.  The transport new orders index has seen an extraordinary reduction in new orders.  China’s PMI went from 50 to 42 which is a massive move.  These aren’t things that suggest anything but a big slow down ahead.

It never feels good as rates go up if you’re in a variable.  It feels even worse reading all the sky is falling articles in the news about inflation & 2% rate hikes this year, but don’t react based on feelings.  Remember, even if we get another 1.5% in rate hikes this year, depending on your variable rate, you’re still saving money.  You’ve saved a significant amount riding it out this far.  The more rate go up, the less potential they have to continue going up.  Locking in immediately takes on a higher penalty risk, higher payments, higher cost.  Do you want to be doing that at a time when inflation & growth is already slowing on rate of change terms? 

CLICK HERE to schedule a call with me.

Bank of Canada Rate Increase – Feb 2022 announcement

Good morning,

The Bank of Canada raised rates 0.25% at this morning’s interest rate announcement, and so begins the rate increase cycle.  

The invasion of Ukraine has thrown a lot uncertainty into the geopolitical landscape.  Oil prices & other commodities have risen sharply, which will add to inflation around the world & weigh on global growth.  So we have rising inflation pressures with slowing growth.  Not a great setup.

In decades past a rising oil price benefited our currency as there was a stronger link between capital spending & energy prices but due to environmental, social & governance pressure with the push for clean energy, we aren’t seeing that here.  The last time oil was over $100 / barrel the loonie was close to par with USD so greater purchasing power reduced costs.  Right now we’re at 78 cents. 

Inflation is still well above the Bank’s 2% target with CPI sitting at 5.1%.  The war in Ukraine will keep that elevated & raise the risk of rising longer term inflation expectations.

What impact will this have on rates?  The 5 year bond yield, which the 5 year fixed rates is priced upon, has dropped since the invasion started, opening the door for a potential easing to 5 yr fixed rates.  Rate hike expectations on what the Bank of Canada will do has now dropped from 6 to 5.  Upward pressure on interest rates has eased a bit. 

If you’re in a variable rate mortgage, a rate increase is never what you want to hear but it’s important to remember that we knew rates were going to start going up here & continue going up this year, but being in a variable, you’re still saving a significant amount vs being in a fixed rate or locking.  Fixed rates are generally well above 3% so compare that to what you’re in right now in a variable.  Is the next 5 years going to be the 1 time in 10 a fixed rate ends up costing less than a variable rate?  I don’t think so but if that anxiety is weighing on your variable rate, get in touch & we can talk through the decision to lock in.

The last point I’ll end on is if you or any friends or family have a mortgage coming up for renewal in the next 2 years, get in touch with me if we haven’t already spoken.  What we’ve been doing for clients the last few weeks is going over how much higher rates would have to rise from here to make renewing early worth it. 

That’s it for me.  

Thanks for watching & have a great day.

Bank of Canada Rate Announcement – Dec 2021

Good morning,

No real change in messaging with the Bank of Canada’s interest rate announcement this morning.  No change to rates.  No indication they’ll be moving up their guidance to be looking to raise rates in the middle quarters of next year.  That said, the risks appear to be to rates going up sooner than expected as markets are pricing in 1 rate hike in March but that is obviously something that can change.

I’ve gotten a lot of inquiries from clients in the last month in variable rate mortgages wondering if they should lock in.  Yes, rates are going to start going up next year but that, in itself, isn’t a reason to lock in.  It’s a question of how many rate increases & how quickly we will get them that determines whether locking in makes sense. 

Right now, variable rates are significantly below fixed rates.  Last year we had fixed rates close to 1.5%.  Going fixed was extremely compelling.  Right now fixed rates are close to 3%.  Compared to current variable rates you’re 5-6 Bank of Canada rate increases (1.25-1.5%) away from that.  The last rate hike cycle saw 5 increases & it took 1.5 years to get there.  If you are concerned about rates going up & lock in, you’re guaranteeing those rate increases immediately vs being able to save a significant amount over the next 2 years let’s call it & for that to pay off, you not only need those 5-6 rate increases but continued increasing beyond that point.  

If you lock in, you also immediately take on the risk of a higher mortgage penalty & if you are like the overwhelming majority of Canadians who break their mortgages early, that’s not a good thing.  

As well, locking in a variable you lose any potential benefit of being able to ride rates back down if the economy slows & we enter a recession.  There is a nimbleness to the variable rate that is a big reason why it’s been the better play close to 90% of the time so keep that in mind & if you’d like to talk about your specific situation please get in touch. 

The one topic that often comes up is the 70s, 80s & early 90s when we had double digit mortgage rates & concerns we could get back to that.  Well, back then there wasn’t anywhere near the same amount of government & private debt as we have now so the economy could handle significant rate increases.  Completely different story today.  A 1% rate increase today has a much larger impact than it would have in, say, the early 80s.  

Rates going up can strike fear into a lot of hearts but when you start to look at what that could actually mean, it’s often not as scary as you think.

That wraps up the last of the Bank of Canada rate announcements for the year so I wanted to thank you for watching & wish you & your families a very Merry Christmas & if you don’t celebrate Christmas, a very happy holiday season : )​​​​

Bank of Canada Rate Announcement – October

Good morning,

The Bank of Canada left rates unchanged at this mornings rate announcement so no changes to your variable rate mortgages or lines of credit.  Some interesting points to take note of: the Bank is ending it’s Quantitative Easing program.  Basically, that’s a form of tightening.

The other change is walking up their forecast for raising rates.  For much of the pandemic the talk was raising rates in 2023.  Over the previous couple announcements, that was bumped up to late 2022 & is now sitting at mid 2022. 

What’s driving that?  Inflation.  The Bank expects inflationary pressures to stay elevated into next year & ease back to around their 2% target late 2022.  

Energy prices aside, a lot of what’s driving inflation are pandemic impacted services.  It’s been a challenge to fill job openings at the low end of the economy as people were paid to stay home, meanwhile a lot of people are sitting on more cash than usual & aren’t as concerned paying $5 more for a haircut or $8 more for lunch.  Demand is up, there’s a lack of labor, people have the money so we see higher prices & that is expected to be a covid related problem that will dissipate over time.

On the other hand, look at, say, energy prices.  With the green movement there has been a serious lack of development in that space.  Of course, we all still need energy so the cost is higher & that isn’t something that will dissipate so quickly.

Every economic recession was lead by a monetary policy error.  The thing to consider with inflation is that it is a lagging indicator.  It is telling you something about the past, not the future.  If you’re basing policy decisions off of the past, you’re late.  Central banks tend to panic & raise rates too much, too quickly & too late & I think that is the risk to housing & the overall economy. 

On real estate, fundamentally there is still a lack of supply generally speaking in Canada.  Supply takes years to fix so the risk to prices going down is rapidly rising rates. 

That covers today’s summary.  If you’d like to talk more about what higher rates could mean for your mortgage, please get in touch & have a great day.

Bank of Canada September Rate Announcement – no change

Good morning,

No rate change at this morning’s Bank of Canada interest rate announcement & no significant change to the outlook.  

What most people want to know is where rates are heading & the forecast is still late 2022.  The key word to hang on there is forecast.  Forecasts are often wrong.. in Jan of this year the Bank expected the economy to contract in Q1 & it grew at an annualized rate of 5.5%.  For Q2 the expectation was 2.5% growth & we saw a contraction of 1.1% annualized.  For those interested the swaps traders are pricing in 1 rate hike in the next 12 months & 2 more over the following year which has come down from July. 

The not-so-silent-killer, which is getting talked about more & more, is inflation as the 3.7% reading is the highest of the last decade.  There are record long wait times for raw materials.  Canada’s Farm Product Price Index rose 24.4% YOY in June which tied for the highest reading since the high inflation of the 70s.  Prices of just about everything are going up.   

So how does inflation relate to your mortgage?  I can say with confidence that all of your mortgage rates are lower than inflation, which is actually a good thing from a borrowing perspective.  That means you’re paying back the money you borrowed with dollars that are becoming less & less valuable.  You essentially have a negative rate mortgage.  Some of your debt is inflating away without having to do anything.  That gives you an opportunity you can play 2 ways:

  •  Conservative approach: try put as much extra cash on your mortgage as possible, take advantage of low rates & try gain as much ground as you can while borrowing costs are so low.  For those that don’t like debt, this is your time to shine. 
  • Higher risk approach: use your extra cash to invest, let your debt erode away & focus your resources on growing your financial assets. 

With the conservative approach, you’ll become debt free quicker, better insulate yourself from market corrections (although following covid it’s hard to see policy makers letting markets crash), but may not benefit from growth in risk assets. 

With the higher risk approach, if we continue to see inflation at these levels or higher, your net worth can grow a lot quicker but you do run the risk of your investments performing poorly & being left with a slower path out of debt. 

These are the conversations you should be having about your finances & if you could use some help or direction, please get in touch as I have an excellent financial planner I can put you in touch with.

This went longer than usual but I’m just getting more & more questions on this topic so hope you found it helpful & please share to anyone you think will benefit from watching this : )

Bank of Canada Rate Announcement March – no change!

Good morning,

The Bank of Canada came out with their rate announcement this morning & have kept rates unchanged, shocker!  To put this in context the Bank has stated they will not look to raise rates until 2023.  That’s what they’re saying.  What could change that?  

Well, remember that little thing by the name of inflation that for the last year I’ve saying is one of the more important factors to watch?  It’s picking up.  Commodities have been on a tear, housing is soaring & we’ve certainly noticed an increase in our monthly bills.  Fixed rates, which are based on the government of Canada bond yields, have increased significantly in the last 2 weeks.  The bond market generally does a good job at front running the economy & things, for now, are better than expected.

Keep in mind there is a great incentive in the powers that be talking down inflation while it slowly creeps up on everything b/c it allows debt to be inflated away as that debt becomes worth less.  That’s known as a soft default.  You’re not NOT paying your bills, your paying back bills that aren’t worth as much.  The risk in talking down doing that is if all of a sudden the market realizes this they could be a sharp increase & shock which could end up being recessionary. 

The Bank highlighted inflation is at the lower bound of its 1-3% range & expects it to move to the top end in the next few months but sees that slowing down as the excess capacity in the economy exerts downward pressure.  Will they make it to 2023?  I have no idea but will be watching it closely. 

Thanks for watching & have a great day.

Bank of Canada Rate Announcement October- no change!

The Bank of Canada kept rates unchanged today in their scheduled rate announcement. The economic rebound in Canada has been better than expected but as we now face a second wave, much of the current outlook is dependent on how covid plays out here at home. Housing has been strong. Personally I’ve seen a lot of clients migrating from the downtown core to places like Victoria, the interior & further out in the lower mainland. Working from home is something many are taking advantage of by upgrading for space.

Of course these record low mortgages rates are a big reason for housing’s strength so how does the interest rate forecast look currently? Officially, the Bank of Canada has said they don’t expect to be raising rates until after 2022. They want to hit a 2% inflation target before moving to any increases & they expect inflation to start to pick up slowly early next year.

The Bank is also continuing its bond purchase program, which suppresses yields (and interest rates). I wanted to include this chart as it really illustrates the eye popping balance sheet growth of Canada’s central bank compared to others around the world since the pandemic started.

Currently our central bank owns 1/3 of our federal debt… so we’re generating debt then buying our own debt. Yes this is something many central banks are doing globally, but as soon as inflation expectations pick up, that means more bond buying is required (so more increases to the balance sheet) in order to keep interest rates from rising. It can turn into a vicious cycle where the end result does not fare well for our currency & the cost of goods.

I don’t think we’ll see much of a change in outlook until the end of this year but we have one more rate announcement coming up in December so will update you then.

That’s it for me today. Thanks for watching & have a lovely Wednesday.

Bank of Canada Rate Announcement – no change!

Good morning!  This morning our new Bank of Canada governor, Tiff Macklem, carried through with his pledge in July to keep rates at ​this level for at least 2 years & left rates unchanged at this morning’s policy announcement.  Central banks around the world seem committed to letting inflation run hot by keeping rates low.  Let’s not forget that low rates has most certainly NOT created meaningful inflation for the last few decades, so what would be different about this time around?

​Following 2008 the massive amount of money supply creation (which pales in comparison to what we’ve seen in the last 6 months), went almost exclusively into propping up financial assets.  What’s different this time around is a commitment to the fiscal side & putting money into the hands of the ppl & the economy, not just wall street.  Governments are creating debts, then printing money to pay for those debts.  What could go wrong? 

On a recent CNBC interview one of the greatest & most successful investors of the last few decades, Stan Druckenmiller, came out saying for the 1st time in a long time that he is actually worried about inflation & that we could easily see 5-10% inflation in the coming years.  ​Ironically, he also pointed out the rising risks also going the other way towards deflation, as every period of deflation is preceded by an asset bubble.  ​With companies are soaring 30%, 40%, 50% on news of stock splits (which add zero value to a company), when bankrupt companies are seeing their stock prices double while their bonds are trading at a few cents on the dollar, when sports bloggers like Dave Portnoy are calling Warren Buffet washed up while they tout the mantra of stocks only go up, it’s hard to argue we are in anything but a ​mania driven bubble. 

So we have 2 risks – deflation & inflation.  What does that mean for your mortgage?

Fixed rates are incredibly low right now.  You can lock in rates at or under 2% for the 1st time in Canada’s history.  Could mortgage rates go lower?  Yes.  Could they go negative?  No.  Are we already very close to zero?  Yes!

Now on the flipside to that, could inflation impact the central bank’s commitment to keeping rates low?  Yes!  Could we see a major breakout of rates from this multi decade downtrend towards zero?  Yes!  Historically have inflation breakouts taken shape quicker than most expect?  YES!

The way I see it, mortgage rates are incredibly attractive right now.  They could go a bit lower, but they could also go A LOT higher.  What impact would having a mortgage rate that’s 0.5% lower have on your life?  What about a rate that’s 2% higher?

These are some of the questions I’m having with clients right now & if you’d like some help mapping through these scenarios, please get in touch.

I’m Ryan.  Thanks for watching.  Have a great day.