In 2022, the prime rate saw an astounding 163% increase in mere ten months. As a result, this set a record that is unlike any other. This sharp incline left financial lenders and borrowers alike wondering: how long will rates stay at their peak? Looking to history for answers reveals one thing – it’s not too long before we see rates lower again.
With borrowing costs key to the Canadian economy, swift action had to be taken to address a ballooning inflation. Consumers and businesses react swiftly with cautionary behaviour when rates spike rapidly. As a result, we face an unprecedented situation in which expected levels of interest may remain elevated for much longer. Possibly longer than their traditional 4 month lifespan. Doing so could trigger economic uncertainty. This is why quick turnaround intervention is required more urgently now than ever before.
2023 Mortgage Rate Predictions
The current economic landscape does not yield a clear-cut path for future interest rate changes. Although historically it is improbable to see the prime rate stay at its high longer than nine to fourteen months, there are numerous factors which may influence this trend including oil prices, wage gains and COVID risk among others. Meanwhile market speculation has placed an expectation of one more Bank of Canada hike before rates peak with the potential for a first cut in December. Now remains the time where we must exercise our best judgement as inflationary pressures take hold amidst variable external forces on all sides.
Although the BoC Governor‘s words may suggest different, it is highly unlikely that mortgage rates and other borrowing costs will stay high into 2024. Economic trends have been showing more promising signs than expected by the Bank of Canada lately. This alone will provide a ray of hope for borrowers waiting to enjoy lower lending costs in future months. Call us to discuss.