Predictions of a prime rate increase mid 2022 might be later than expected

There has been a lot of discussion about when the first interest rate hikes will happen. Some financial markets are predicting a rate increase as early as March 2022, but the BoC Deputy Governor Lawrence Schembri stated last week that “there’s a lot of uncertainty about the timing of the closing of the output gap, so one should be careful not to assume it’s necessarily going to be the second quarter. It’s a range of six months – that’s our best estimate”.

The Bank of Canada Governor Tiff Macklem also mentioned that “while the timing of the next rate hike is “getting closer”, it’s still very dependent on economic conditions.

Schembri also mentions, it is becoming increasingly more difficult to predict when rates will adjust due to the labour market uncertainty among other factors. “Our assessment of labour market conditions and underlying capacity and inflationary pressures is now more difficult,” he said. The Bank of Canada expects inflation to cool as employment and productivity improve and will not raise interest rates until economic slack is absorbed.

With the current Bank prime rate and the aggressive spreads, you can still secure a variable mortgage rate as low as 1.00% for a purchase or mortgage renewal.