The Bank of Canada (BoC)  is meeting on Wednesday to decide whether or not to hike its Overnight Lending Rate—but, rest assured, an increase is coming.

“Right now, I think it’s anyone’s guess whether they hike it, but they definitely won’t drop it,” said Daniel Johanis, owner of Pekoe Mortgages.

“They may wait another month to see what happens. If they keep it as is and they have to go a little harder and raise it in July, that will prolong the pain.”

The pain Johanis is referring to is that around this time last year, when the average mortgage amount was, according to the Canadian Real Estate Association, $711,000 and Canadians took advantage of low five-year variable rates, their mortgage payments were about $2,275 a month. Today their monthly payment has surge to $3,525.

If the BoC doesn’t implement a rate hike tomorrow, Johanis is positive the central bank will during its next meeting on July 12.

“If they put the breaks on right now, it will look like inflation in entrenched and the Bank of Canada isn’t doing its job and not being effective,” he said.

“I think they don’t want to give off that type of sentiment, that the bank isn’t being effective in controlling inflation.”

The BoC did state it would halt its rate-hiking regime if certain economic conditions were met, which they apparently haven’t.

Most observers even expected the central bank to cut rates before the year is over, however, Ron Butler, founder of Butler Mortgage in Toronto, says the central bank never made such a declaration. Such speculative chatter actually came from the marketplace.

“The Bank of Canada was scrupulous about not saying that,” Butler said. “This was purely market chatter.”

The reason another rate hike is practically imminent is inflation, which is presently 4.4%, remains stubbornly elevated and that necessitates more countervailing rate increases.

“The simple truth is if inflation continues staying what it is or keeps going up in tiny waves, if there’s a tiny increase in inflation next month, we’ll naturally see a reaction from the bank. That’s just the way it goes,” Butler added.

There is, however, one way to interest rates will come down.

“Inflation may not be here forever if we finally do enter a sustained, and obvious, and bad, recession; then inflation will come way down,” Butler continued. “Recession equals rates coming down; no recession equals either no change or maybe they go up.”


  • Neil Sharma

    Neil is a Toronto-based journalist. Before his most recent stint as STOREYS' senior reporter, he was a regular contributor for the Toronto Star, Toronto Sun, National Post, Vice, Canadian Real Estate Wealth, where he also served as editor-in-chief, and several other publications.