With a variable mortgage interest rate, the percentage charged on the loan can go up or down until the maturity date. In recent years, this rate has been highly volatile, with a sharp increase in 2022. This puts people who are about to renew their mortgage in a rather awkward position. Indeed, the resulting increase is quite substantial and above all unavoidable. The question today is whether variable mortgage rates will rise again?
Les facteurs qui influencent le taux d’intérêt hypothécaire variable
There are many factors that can influence the variable mortgage interest rate. At the top of the list is the Bank of Canada’s policy rate. There are also potential regulations that can change the game. This is followed by inflation and global economic growth. There are also applications for variable rate mortgages.
Augmentation du taux directeur de la Banque du Canada
In March 2022, the Bank of Canada began a series of increases in its key interest rate, which had remained unchanged for two years. In early 2023, the Central Bank made 8 consecutive 0.25% increases, bringing the policy rate to 4.5%. This is a significant increase in a short period of time. For those who have opted for variable rate mortgages and for potential property buyers, this significantly inflates monthly payments.
Les autres éléments qui influent sur le taux d’intérêt hypothécaire variable
The Bank of Canada’s decision to raise the policy rate is never random. There are a series of parameters that push the Bank in this direction.
First, there is the inflation that the country has suffered in recent years, and especially in 2022. It is worth noting that the whole world is experiencing high inflation rates. Even if this inflation seems to be slowing down, it is still very much present. For comparison, the percentage was 8.1% as of June 2022 (on an annual calculation basis), dropping to 6.9% as of October 2022. It should be noted that the Bank of Canada is counting on a 2% inflation rate to be reached by 2024.
Then there are specific regulations or even laws that could have a direct or indirect impact on the variable mortgage rate. These can be interest rate or mortgage related.
Finally, consumer behavior in relation to the purchase of real estate can influence the market and interest rates. In the end, it is a whole set whose links are interdependent and generally move together in the same direction.
In reality, anticipating the rise or fall of interest rates remains a difficult exercise. Nevertheless, it is still possible to analyze the latest trends and they undeniably show an upward trend. However, if this trend continues, the increase is not expected to be as large as in 2022.