Bank of Canada hikes key interest rate to 5 per cent

The cost of borrowing money just got more expensive.

The Bank of Canada raised its key interest rate a quarter of a point Wednesday to 5.0 per cent, the highest it has been since 2001.

The central bank says the hike is necessary to control inflation, which continues to hover above the bank’s target of two per cent. The bank expects inflation to stall at around three per cent for the next year before declining to two per cent by mid-2025.

The decision Wednesday didn’t make any mention of an interest rate pause, leaving the door open for another hike.

The next rate decision comes down in September.

Regina mortgage broker Carrie Cardinal said the increase didn’t come as a shock to her.

“This was expected because we’ve had talk this was coming. But hopefully this is the last increase,” said Cardinal.

Cardinal noted she hadn’t heard any concerns from her clients, but it is still early.

“I imagine that many clients that are in variable-rate mortgages will have concerns as this is going to hit their bank account again for monthly payments,” said Cardinal.

Those who have a variable-rate mortgage could see a $15-a-month increase for every $100,000 remaining on their mortgage.

“If you have a variable-rate mortgage, you can lock into a fixed-rate mortgage,” Cardinal said. “The fixed rates are still lower than what the variable rates are.”

— With files from The Canadian Press and 650 CKOM’s Will Mandzuk