After keeping interest rates steady for just over a year, the Bank of Canada has clearly hinted that interest rates will be going up in the near future:
On balance, the Bank judges that there is an increased risk that future inflation will persist above the 2 per cent inflation target and that some increase in the target for the overnight rate may be required in the near term to bring inflation back to the target.
The prime rate, which is currently at 6% and moves in lockstep with the Bank’s overnight lending rate, will also likely be heading higher this summer. Consumers can expect to pay more interest on loans and variable rate mortgages.
Yields are also rising in the bond markets. The yield on 5-year bonds has risen from 4.01% at the beginning of this quarter to its current level of 4.54%. The interest rate on fixed-term mortgages, which are tied to bond market yields have also been inching up of late. Consumers whose mortgages are coming up for renewal will be paying more than they would have just one month back.