Bank of Canada Rate Announcement Jul 12th, 2023

Lee Welbanks • July 12, 2023

Bank of Canada raises policy rate 25 basis points, continues quantitative tightening.


FOR IMMEDIATE RELEASE

Media Relations

Ottawa, Ontario

July 12, 2023


The Bank of Canada today increased its target for the overnight rate to 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank is also continuing its policy of quantitative tightening.


Global inflation is easing, with lower energy prices and a decline in goods price inflation. However, robust demand and tight labour markets are causing persistent inflationary pressures in services. Economic growth has been stronger than expected, especially in the United States, where consumer and business spending has been surprisingly resilient. After a surge in early 2023, China’s economic growth is softening, with slowing exports and ongoing weakness in its property sector. Growth in the euro area is effectively stalled: while the service sector continues to grow, manufacturing is contracting. Global financial conditions have tightened, with bond yields up in North America and Europe as major central banks signal further interest rate increases may be needed to combat inflation.


The Bank’s July Monetary Policy Report (MPR) projects the global economy will grow by around 2.8% this year and 2.4% in 2024, followed by 2.7% growth in 2025.


Canada’s economy has been stronger than expected, with more momentum in demand. Consumption growth has been surprisingly strong at 5.8% in the first quarter. While the Bank expects consumer spending to slow in response to the cumulative increase in interest rates, recent retail trade and other data suggest more persistent excess demand in the economy. In addition, the housing market has seen some pickup. New construction and real estate listings are lagging demand, which is adding pressure to prices. In the labour market, there are signs of more availability of workers, but conditions remain tight, and wage growth has been around 4-5%. Strong population growth from immigration is adding both demand and supply to the economy: newcomers are helping to ease the shortage of workers while also boosting consumer spending and adding to demand for housing.


As higher interest rates continue to work their way through the economy, the Bank expects economic growth to slow, averaging around 1% through the second half of this year and the first half of next year. This implies real GDP growth of 1.8% in 2023 and 1.2% in 2024. The economy will move into modest excess supply early next year before growth picks up to 2.4% in 2025.


Inflation in Canada eased to 3.4% in May, a substantial and welcome drop from its peak of 8.1% last summer. While CPI inflation has come down largely as expected so far this year, the downward momentum has come more from lower energy prices, and less from easing underlying inflation. With the large price increases of last year out of the annual data, there will be less near-term downward momentum in CPI inflation. Moreover, with three-month rates of core inflation running around 3½-4% since last September, underlying price pressures appear to be more persistent than anticipated. This is reinforced by the Bank’s business surveys, which find businesses are still increasing their prices more frequently than normal.


In the July MPR projection, CPI inflation is forecast to hover around 3% for the next year before gradually declining to 2% in the middle of 2025. This is a slower return to target than was forecast in the January and April projections. Governing Council remains concerned that progress towards the 2% target could stall, jeopardizing the return to price stability.


In light of the accumulation of evidence that excess demand and elevated core inflation are both proving more persistent, and taking into account its revised outlook for economic activity and inflation, Governing Council decided to increase the policy interest rate to 5%. Quantitative tightening is complementing the restrictive stance of monetary policy and normalizing the Bank’s balance sheet. Governing Council will continue to assess the dynamics of core inflation and the outlook for CPI inflation. In particular, we will be evaluating whether the evolution of excess demand, inflation expectations, wage growth and corporate pricing behaviour are consistent with achieving the 2% inflation target. The Bank remains resolute in its commitment to restoring price stability for Canadians.


Information note

The next scheduled date for announcing the overnight rate target is September 6, 2023. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the Monetary Policy Report on October 25, 2023.


Read the July 12th, 2023 Monetary Policy Report


Lee Welbanks

Navigating The Housing Market

By Lee Welbanks • July 16, 2025
If you’ve been thinking about buying a property, whether that be your first home, next home, forever home, or a home to retire into, the current state of the Canadian economy might have you wondering: Is this really the right time to make a move? There is certainly no shortage of doom and gloom in the news out there. The truth is, that’s a tough question to answer in the best of times. It’s nearly impossible to know for sure what’s going to happen next with the housing market in Canada. It could heat up or it could cool down. So here’s some advice. Instead of basing your buying decision entirely on external market factors, like the economy or housing market, consider looking for the answers internally. When you stop looking at the market to determine your timing to buy a home, and instead examine the personal reasons you have for wanting to buy a home, the picture can become much clearer. Here are some questions to consider. Although they are subjective, they will help bring you clarity. Ask yourself: Does buying a property now put me in a better financial position? Do I make enough money now to afford a new home and maintain my lifestyle? Do I feel confident with my current employment status? Have I saved enough money for a down payment? How long do I plan on living in this new home? Is there any scenario where I might have to sell quickly and potentially lose money? Does buying a property now move me closer to my life goals? Do I really want to buy now or am I just feeling a lot of pressure to just buy something? Am I holding back because I'm scared property prices might drop soon? There’s no doubt that buying a home can be stressful, but it doesn’t have to be. Having a plan in place is the best course of action to help you make good decisions and alleviate that stress. If you’d like to have a conversation to discuss your plans, ask some questions, and map out what buying a home looks like for you, we can address many of the unknowns together. The best place to start is to work through a mortgage pre-approval. There is no cost for this service, you’ll learn exactly what you can qualify for, and it will provide a lot of clarity about your situation. You might decide that it’s best to wait before buying, and that’s just fine. You might find that now’s a perfect time for you to buy! If you'd like to talk, please connect anytime. You’re not in this alone. We can work through everything together.

Buying a Vacation Home? Here’s What You Need to Know

By Lee Welbanks • July 15, 2025
The idea of owning a vacation home—your own cozy escape from everyday life—is a dream many Canadians share. Whether it’s a lakeside cabin, a ski chalet, or a beachside bungalow, a second property can add lifestyle value, rental income, and long-term wealth. But before you jump into vacation home ownership, it’s important to think through the details—both financial and practical. Start With Your 5- and 10-Year Plan Before you get swept away by the perfect view or your dream destination, take a step back and ask yourself: Will you use it enough to justify the cost? Are there other financial goals that take priority right now? What’s the opportunity cost of tying up your money in a second home? Owning a vacation home can be incredibly rewarding, but it should fit comfortably within your long-term financial goals—not compete with them. Financing a Vacation Property: What to Consider If you don’t plan to pay cash, then financing your vacation home will be your next major step. Mortgage rules for second properties are more complex than those for your primary residence, so here’s what to think about: 1. Do You Have Enough for a Down Payment? Depending on the type of property and how you plan to use it, down payment requirements typically range from 5% to 20%+ . Factors like whether the property is winterized, the purchase price, and its location all come into play. 2. Can You Afford the Additional Debt? Lenders will calculate your Gross Debt Service (GDS) and Total Debt Service (TDS) ratios to assess whether you can take on a second mortgage. GDS: Should not exceed 39% of your income TDS: Should not exceed 44% If you’re not sure how to calculate these, that’s where I can help! 3. Is the Property Mortgage-Eligible? Remote or non-winterized properties, or those located outside of Canada, may not qualify for traditional mortgage financing. In these cases, we may need to look at creative lending solutions . 4. Owner-Occupied or Investment Property? Whether you’ll live in the home occasionally, rent it out, or use it strictly as an investment affects what type of financing you’ll need and what your tax implications might be. Location, Location… Logistics Choosing the right vacation property is more than just finding a beautiful setting. Consider: Current and future development in the area Available municipal services (sewer, water, road maintenance) Transportation access – how easy is it to get to your vacation home in all seasons? Resale value and long-term potential Seasonal access or weather challenges What Happens When You’re Not There? Unless you plan to live there full-time, you'll need to consider: Will you rent it out for extra income? Will you hire a property manager or rely on family/friends? What’s required to maintain valid home insurance while it’s vacant? Planning ahead will protect your investment and give you peace of mind while you’re away. Not Sure Where to Start? I’ve Got You Covered. Buying a vacation home is exciting—but it can also be complicated. As a mortgage broker, I can help you: Understand your financial readiness Calculate your GDS/TDS ratios Review down payment and lending requirements Explore creative solutions like second mortgages , reverse mortgages , or alternative lenders Whether you’re just starting to dream or ready to take action, let’s build a plan that gets you one step closer to your ideal getaway. Reach out today—it would be a pleasure to work with you.