Bank of Canada rate decisions 2022: from 0.25% to 4.25%

This article describes the Bank of Canada's policy rate decisions in 2022. In that year the Bank raised its target for the overnight rate seven times, from 0.25% to 4.25%. Decisions after December 2022 are not covered here.8

The seven increases in 2022

The table lists each announcement, with the target rate before and after. Each change took effect the day after the announcement.18

The July 13 announcement was the largest single increase of the year. The Bank said it was raising the policy rate by 100 basis points to "front-load the path to higher interest rates."4

The December 7 statement described the aim of the increases as bringing supply and demand back into balance and returning inflation to target.7

The policy rate and mortgage rates

The policy rate is the Bank of Canada's target for the overnight rate. It is not a mortgage rate. Lenders set fixed and variable mortgage rates, and those rates depend on many factors, including bond yields and each lender's own pricing.

This article does not give 2022 mortgage rate figures. The sources checked for this update did not include dated, primary mortgage rate data that could support a specific number.

The mortgage stress test

OSFI's minimum qualifying rate letter, dated December 17, 2021, states that from June 1, 2021 the minimum qualifying rate is "the greater of the mortgage contractual rate plus 2 percent or 5.25 percent." Before that date, the letter says, the floor was the five-year benchmark rate, which it gives as 4.79% in May 2021.9

Under the June 2021 rule, a contract rate of 5.5% would be tested at 7.5%. Check how the current rules apply to a specific mortgage with a licensed mortgage professional.

The housing market

The Canadian Real Estate Association reported that its MLS Home Price Index was about 13% below its peak at the end of 2022. The same release reported 4.2 months of inventory at the end of December 2022.10 That release was published on January 16, 2023, after this article's original date, so these figures are included in the 2026 update.

Variable-rate mortgages and trigger rates

Some variable-rate mortgages keep the payment fixed while the rate changes. When rates rise, a larger share of a fixed payment goes to interest and a smaller share goes to principal. If the payment no longer covers the interest, the mortgage can reach a "trigger rate", the point at which the lender's terms may require a payment increase, a lump-sum payment, or the unpaid interest being added to the balance.

Whether these terms apply, and at what level, depends on the loan contract. Borrowers with this type of mortgage should ask their lender in writing for the trigger rate and the payment terms that apply to them.

The December 2022 statement

The December 7 statement said that the Bank's Governing Council "will be considering whether the policy interest rate needs to rise further." That was the Bank's position when the December 7 decision was announced.7 This article describes the position at that date and does not describe what happened after December 2022.