When Will the Bank of Canada Raise Interest Rates Hike Again?

When consumers want to take out a large sum of money for a big purchase, such as a car or a house, they often have to apply for a loan to ensure they can afford it. When applying for a loan, you’ll be charged an interest rate, the amount of which varies from bank to bank. 

However, in addition to the interest for the loan, you’re also charged policy interest on top of it, a percentage that is determined by the Bank of Canada that most banks will raise their rates to meet. 

The BoC changes its policy interest periodically, so if you plan on taking out a loan, you may wonder: when is the next Bank of Canada interest rate hike expected? Keep reading to learn about the next rate increase and other related FAQs about interest rates!

When is the next Bank of Canada rate hike?

When is the next Bank of Canada rate hike expected? Currently, the Bank of Canada is set to raise its interest rates on July 12, 2023. 

As per tradition, the bank will publish its upcoming forecast for Canada’s economy and inflation, along with any risks to the rate projection. These will be published simultaneously. 

What is the Bank of Canada’s current interest rate?

Currently, the Bank of Canada has raised its interest rate to 4.75%. This interest rate was raised on June 06, 2023, and will remain in place until the upcoming rate hike in July. This is a significant increase from 0.25% in March of 2022. 

This aggressive increase occurred in response to the high inflation rate in June 2022 and is considered one of the highest interest rate hikes in Canadian history. As a result, this higher interest rate has brought higher prime rates and mortgage rates for Canadian consumers.

What is Canada’s interest rate hike forecast for 2023?

In February 2023, it was estimated that the Bank of Canada would maintain a stable interest rate of 4.5% throughout 2023. However, on June 06, 2023, the BoC raised its interest rates up to 4.75%. It’s estimated that these current rates should adjust consumption and inflation for the country. 

Related FAQs

In addition to questions on interest rates, many Canadians often ask several other questions related to inflation and finances. Here are some popular FAQs on finances in Canada:  

What happens when the policy interest rate increases?

When the national policy interest rate increases, it means it will now cost consumers more to borrow money than it did when the policy interest sat at its previous rate. 

This will affect individuals who have a mortgage, a line of credit, or other similar loans that are based on variable interest rates. A rise in policy interest will also affect those who need to renew their fixed-rate mortgage loans. 

What is the highest interest rate allowed in Canada?

In 2023, banks and other lenders cannot legally charge any interest above 60%, with the exception of payday loans. 

If a consumer is charged over the legal limit, this is considered a criminal interest rate, meaning the lender can be prosecuted for charging such high fees.

Therefore, before signing onto a loan or mortgage, make sure to thoroughly examine the paperwork to ensure you’re being charged the right amount of interest. 

What is the difference between the policy interest rate and regular interest?

The policy interest rate goes hand-in-hand with the interest rates that individual banks and lenders set for loans and mortgages. When the Bank of Canada sets the policy rate, the interest rate charged for loans and mortgages will increase or decrease based on the current interest rate. 

For example, the Canada-wide policy interest rate for June 2023 is 4.75%, and CIBC has adjusted its base rate to 6.95%. This means that, on top of the policy rate, CIBC has added an additional 2.2% of interest to their lending price.

How does the BoC interest rate impact your finances?

When the national interest rate rises, this can have a significant impact on spending for consumers, from regular households to those who own their own businesses.

For consumers who have to pay mortgages or are currently paying off the balance of a loan, a spike in interest rates can result in the amount of their payments going up as well.

Therefore, when an interest rate hike occurs, those who owe outstanding balances are well ahead to re-examine their spending habits to see where their budget could be altered to account for bigger loan payments. 

Those who debt can get ahead by reducing their expenses on non-essential items, consolidating their high-interest debts, avoiding borrowing more money than they already owe, and finding ways to increase their income to allow for more wiggle room in their expenses.

How does the policy interest rate affect mortgages?

The way that the policy interest rate affects your mortgage largely comes down to the type of mortgage you have. For instance, if you’ve signed on to a fixed-rate mortgage, you will not have to contend with the new policy interest rate for your current loan payments. 

Until the renewal period for your mortgage comes around, you will only have to make loan payments based on the policy rate that was in place when you signed your mortgage papers.

However, homeowners who have a variable rate mortgage will, unfortunately, have to pay higher interest and higher fees on their loan payments when the policy rate hikes up. 

Further, if you’ve yet to sign a mortgage and are still in the process of purchasing a new property, the policy interest rate increase may affect your ability to make such a purchase. If the rate goes up before the finalization of your sale, you may no longer have the budget and borrowing capacity to stay on top of the loan payments. 

Therefore, when purchasing a home, it’s recommended to stay up to date with the current policy rate and re-examine your budget if the rate changes to ensure you can still afford to make your purchase. 

Conclusion: When is the next Bank of Canada interest rate hike? 

So, when is the next Bank of Canada rate hike? According to the BoC website, the Bank of Canada will raise the policy/prime rate on July 12, 2023. The estimated amount is currently undetermined. However, the current policy rate sits at 4.75%, which was last increased on June 06, 2023. 

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