The Bank of Canada stated that the nation's financial system would withstand increased stability threats brought on by higher interest rates and inflation, which strain many people. The inflation rate in Canada has grown significantly to 6.9% this year, 2022, compared to the previous few years, according to GlobalData.
Financial reforms implemented after the 2008–2009 financial crisis strengthened capital and liquidity buffers and reduced risks for Canada. The nation is also not anticipated to experience a "severe" economic downturn that results in significant job losses. Canadians who recently purchased a home with variable-rate mortgages may be experiencing financial stress because of the sharp spike in interest rates.
Since the start of the epidemic, around 670,000 new mortgages have been taken out with variable rates, making up about 50% of all loans as of mid-2021.
As a result, many Canadians are now more susceptible to increased borrowing rates. The Bank of Canada calculated that roughly 50% of changeable, fixed-payment mortgages have gotten to the point wherein extra payments may be required in a research paper that was released alongside the speech. That represents around 13% of all mortgages in Canada.
When the next decision was made on December 7, markets were betting on a roughly one-third likelihood that policymakers would raise interest rates by an additional 50 basis points. At 3.75 percent right now, the overnight rate has increased by 3.5 percentage points since March.
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