How clients 'can get through the next year in one piece'
For years, Canadians had been under a low-interest rate environment; rates were pushed to near-zero during the height of the pandemic crisis, giving households a further incentive to borrow without having to repay large amounts.
“Now the problem is that rates have more than doubled from where they were,” he says. “Even if it’s interest-only, the monthly servicing costs have become pretty significant, especially with a mortgage when you’re obligated to pay down the principal loan amount. I think there’s a lot of households that maybe took their debt loads for granted, and are now unfortunately under more pressure.”
The BoC announcement indicated that it may be near the peak of its interest rate cycle. From Damiani’s point of view, that means it’s likely to either pause or raise by a very incremental amount more, and rates will likely start declining towards the end of next year.
“If you have a fixed-rate mortgage that’s coming due next year, it’s probably best to lock it into a short-term mortgage for maybe a one-year term,” he says.
The central bank’s decision comes following the latest inflation print from Statistics Canada, which found CPI inflation remained at 6.9% in October. In its statement yesterday, the BoC said there are hints of easing price pressures as shown by decelerating core inflation over three-month windows, though inflation is still well above its target, and short-term inflation expectations remain elevated.
