The Bank of Canada is expected to make its next interest rate announcement this month, and experts are weighing in on what might be in store for Canadians.

The update is scheduled to drop on Jan. 25. It could either be the first interest rate increase of the year or a hold on the current interest rate of 4.25 per cent.

Last year, the Bank of Canada updated its interest rate seven times, causing uncertainty and anxiety among potential homebuyers and investors. The move came as a measure to curb inflation.

Our interest rate decisions impact households and the #economy at different speeds.

Bringing inflation down won’t happen overnight, but we’re determined to get inflation back to target🎯, and we will. https://t.co/7Evely7q17 #AskTheBoC #cdnecon pic.twitter.com/5D59DDcktP

— Bank of Canada (@bankofcanada) December 21, 2022

Now that the Consumer Price Index has fallen a little — December 2022’s CPI stood at 6.3 per cent — a rate hold is much more likely.

James Laird, co-CEO of Ratehub.ca and president of CanWise mortgage lender, provided his insights on the matter.

“Inflation moving down is good news for existing variable-rate holders and anyone who requires a fixed-rate mortgage in the near future,” he said in an email.

Laird advises variable-rate and home equity line of credit (HELOC) holders to budget for a 25 basis-point increase. Too many further rate increases are unlikely to happen this year.

“Anyone who requires a fixed-rate mortgage in the next couple of months should shop around frequently to ensure they are getting the best rates,” the expert suggests.

Those shopping for a home are advised to get a pre-approval to hold today’s rates, so that a rate hike does not impact them. In the event that the rates drop, they will still be eligible for the lower rates.

Laird believes home values will stabilize as mortgage rates do. “Limited rate increases or possibly fixed rate decreases will provide support for home values at their current levels.”

He also predicts a rate hold in March 2023, in case January 25 brings another rate increase for Canadians and the CPI continues to lower.

If there's a 25-point increase:

According to Ratehub.ca’s mortgage payment calculator, a homeowner who put a 10% down payment on a $626,318 home with a five-year variable rate of 5.30 per cent amortized over 25 years (total mortgage amount of $581,160) has a monthly mortgage payment of $3,480.

In case a 25-basis point rate increase is in order this month, this homeowner’s variable mortgage rate will increase to 5.55 per cent and their monthly payment will increase to $3,564.

This will result in the homeowner paying $84 more per month — or $1,008 per year — on their mortgage payments.

In this case, the home price of $626,318 is based on December 2022 averages calculated by the Canadian Real Estate Association (CREA).

Have rising interest rates impacted your decisions or aspirations about buying a home in Canada?