Bank of Canada Increases Overnight Rate to 2.50% – WHAT DOES THIS ALL MEAN!?

In Wednesday’s announcement, The Bank of Canada raised its benchmark interest rate by 1.00% which was a larger increase than had been anticipated. This is the largest single increase in the overnight rate that we have seen in more than 20 years.  


During the pandemic the central bank cut the lending rate to stimulate the economy by encouraging people to borrow and invest at a low rate. It has now raised the rates 4 times since March as an aggressive campaign to fight inflation in this overheated Canadian economy.

Bank of Canada governor Tiff Macklem said the bank made the decision to front-load its rate-hiking campaign because Canadians “are getting more worried that high inflation is here to stay. We cannot let that happen.”

What does this mean for the housing market?

The Hamilton-Burlington housing market was red hot for most of the pandemic. Record low interest rates fuelled demand and drove prices up to their highest levels ever. The Bank of Canada increased the benchmark interest rate to 2.5% in an attempt to restore balance in the housing market and decrease the sky rocketing inflation.

The average sale price of homes sold in the Burlington-Hamilton area has seen a slight decrease month over month since a record high number in February at $1,104,163, to the most recent $946,026 in June. We are definitely seeing a transition shifting from a hot seller’s market to a more balanced market for both buyers and sellers.

What does this mean for first time home buyers?

If you’re in the market for a new home, you need to get pre-approved in order to determine your budget and be able to hold today’s rates for up to 180 days while you search for a home. This will protect you from any further rate increases that may happen during that time. The mandatory stress test will ensure that you can withstand higher lending rates. Although this may decrease the lenders amount, it will provide security in that as rates continue to increase, you will continue to be able to afford your mortgage.

The good news:

  1. There are more available homes to choose from meaning less competition and bidding wars. In June there was an increase of 27.1% new listings on the Hamilton-Burlington real estate board compared to June of 2021.
  2. That extra layer of protection in the form of the ability to have conditions in your offer such as mortgage/financing approval, home inspection and status certificate review is back.
  3. There is less of a time crunch to make a decision, allowing buyers to take their time and make an important decision that they feel secure in.

We understand that these big announcements can spark a number of questions surrounding the housing market, what the future looks like, and what it means for you. We are always happy to answer any questions you may have, and give you the facts about your purchasing power and the value of your real estate investments.

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