What Buyers Really Need to Know About the December 2022 Bank of Canada Policy Rate Hike
The recent series of Bank of Canada prime rate hikes remain on track to wind down 2022. The BoC made their final announcement of 2022 yesterday (December 7), leaving prospective homebuyers wondering is they should wait until 2023 to get a mortgage, or make their move now before the fiscal year comes to a close. Below is a breakdown of what you need to consider before making your decision.
Another 50 Basis Points Interest Rate Hike
The Bank of Canada raised the prime rate by 50-basis points. This is in line with our last Penticton mortgage rate announcement in the autumn. With two 50-basis point hikes in a row, the trend of lower increases persists. If you recall, the BoC raised the rate by as much as a full 1-percentage point prior to the late autumn and early winter (today). In the grand scheme of things, this plateauing is a good thing for homebuyers who favor variable mortgage rates (which move in the same direction as the prime rate).
Why Another Hike?
So why the increase at all? If you’ve been shopping for essentials lately, you already know why. Inflation around BC, Canada, and the world as a whole remains high. The BoC raises the cost of borrowing money to curb the demand for goods and services. In reducing demand, the law of economics stipulates that supply increases and prices subsequently fall. In theory.
So, Should You Buy?
What’s not “in theory” (as per above) is the fact that supply of Penticton real estate is bouncing back, which is driving down prices for key desirable properties. Better inventory, lower prices, and a plateauing of the prime rate infers that if you are thinking about buying a home before the year ends, you should do so. View more on why Penticton real estate is a great investment right now.
At the very least, prospective buyers should get pre-approved (before year-end) with the help of a local broker who knows the local market better than any. Further, a professional broker can help you get access to lower than advertised mortgage rates, and can present to you alternative private lenders, should Canada’s big banks not be the right fit for your financial status.
The next scheduled prime rate announcement is January 25, 2023. The BoC will publish its next full outlook for the economy and inflation, including risks to the projection at the same time. We don’t suggest waiting until then. Instead, strike now while real estate inventory and prices remain in your favor.
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