On September 7, 2022, the Bank of Canada announced that overnight rates have increased to 3.25%, the bank rate to 3.5%, and the deposit rate to 3.25%.

We’ve seen the Bank of Canada steadily hike interest rates throughout 2022, and the latest increase is part of its response to rising global and domestic inflation.

The bank’s announcement cited global conditions contributing to inflation, such as ongoing supply chain disruptions, the effects of the COVID-19 pandemic, and the war in Ukraine. The bank also stated that additional interest rate hikes might be necessary to continue its response to inflation.

What Does the Rate Hike Mean for Real Estate?

Inflation and rising interest rates directly impact the Canadian real estate market. The overnight rate is involved in determining the interest rate of your mortgage. So as it increases, so does the interest rate financial institutions offer homebuyers.

Looking back to the beginning of 2022, the overnight interest rate was 0.25%. Now at 3.25%, new mortgages will have a higher interest rate than those in January.

But it’s not all doom and gloom.

Do you remember what else was happening in 2021 and into 2022? Intense bidding wars as potential homebuyers competed for the seller’s acceptance. This new rate will ideally even out the market and make it easier for buyers to secure their dream home without bidding wars driving the price up.

Additionally, the current rate is still lower than in 2008, when it surpassed 4%, and much lower than the 10%+ rates of the 1990s.

Nobody knows what the future holds, but there’s no denying that buying a home is still a reliable investment. You can still secure a reasonable interest rate and sidestep the intense bidding wars of 2021.

Ready to start your homebuying journey? Contact us today to find your next home.

Hi, I’m Joel, a real estate professional based in Toronto.

My approach is simple—I put you first. I believe in open communication, total transparency, and meaningful results. I’ll guide you through the real estate process, market values, and always keep the focus on you—and your needs.