Bank of Canada Rate Announcement Jul 13th, 2022

Diane Gogar • July 13, 2022

Bank of Canada increases policy interest rate by 100 basis points, continues quantitative tightening.


FOR IMMEDIATE RELEASE

Media Relations

Ottawa, Ontario

July 13, 2022


The Bank of Canada today increased its target for the overnight rate to 2½%, with the Bank Rate at 2¾% and the deposit rate at 2½%. The Bank is also continuing its policy of quantitative tightening (QT).


Inflation in Canada is higher and more persistent than the Bank expected in its April Monetary Policy Report (MPR), and will likely remain around 8% in the next few months. While global factors such as the war in Ukraine and ongoing supply disruptions have been the biggest drivers, domestic price pressures from excess demand are becoming more prominent. More than half of the components that make up the CPI are now rising by more than 5%. With this broadening of price pressures, the Bank’s core measures of inflation have moved up to between 3.9% and 5.4%. Also, surveys indicate more consumers and businesses are expecting inflation to be higher for longer, raising the risk that elevated inflation becomes entrenched in price- and wage-setting. If that occurs, the economic cost of restoring price stability will be higher.


Global inflation is higher, reflecting the impact of the Russian invasion of Ukraine, ongoing supply constraints, and strong demand. Many central banks are tightening monetary policy to combat inflation, and the resulting tighter financial conditions are moderating economic growth. In the United States, high inflation and rising interest rates are contributing to a slowdown in domestic demand. China’s economy is being held back by waves of restrictive measures to contain COVID-19 outbreaks. Oil prices remain high and volatile. The Bank now expects global economic growth to slow to about 3½% this year and 2% in 2023 before strengthening to 3% in 2024.


Further excess demand has built up in the Canadian economy. Labour markets are tight with a record low unemployment rate, widespread labour shortages, and increasing wage pressures. With strong demand, businesses are passing on higher input and labour costs by raising prices. Consumption is robust, led by a rebound in spending on hard-to-distance services. Business investment is solid and exports are being boosted by elevated commodity prices. The Bank estimates that GDP grew by about 4% in the second quarter. Growth is expected to slow to about 2% in the third quarter as consumption growth moderates and housing market activity pulls back following unsustainable strength during the pandemic.


The Bank expects Canada’s economy to grow by 3½% in 2022, 1¾% in 2023, and 2½% in 2024. Economic activity will slow as global growth moderates and tighter monetary policy works its way through the economy. This, combined with the resolution of supply disruptions, will bring demand and supply back into balance and alleviate inflationary pressures. Global energy prices are also projected to decline. The July outlook has inflation starting to come back down later this year, easing to about 3% by the end of next year and returning to the 2% target by the end of 2024.


With the economy clearly in excess demand, inflation high and broadening, and more businesses and consumers expecting high inflation to persist for longer, the Governing Council decided to front-load the path to higher interest rates by raising the policy rate by 100 basis points today. The Governing Council continues to judge that interest rates will need to rise further, and the pace of increases will be guided by the Bank’s ongoing assessment of the economy and inflation. Quantitative tightening continues and is complementing increases in the policy interest rate. The Governing Council is resolute in its commitment to price stability and will continue to take action as required to achieve the 2% inflation target.


Information note


The next scheduled date for announcing the overnight rate target is September 7, 2022. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR on October 26, 2022.


DIANE GOGAR
MORTGAGE PROFESSIONAL
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Mortgage Approval 101: GDS & TDS Explained

By Diane Gogar • August 13, 2025
Can You Afford That Mortgage? Let’s Talk About Debt Service Ratios One of the biggest factors lenders look at when deciding whether you qualify for a mortgage is something called your debt service ratios. It’s a financial check-up to make sure you can handle the payments—not just for your new home, but for everything else you owe as well. If you’d rather skip the math and have someone walk through this with you, that’s what I’m here for. But if you like to understand how things work behind the scenes, keep reading. We’re going to break down what these ratios are, how to calculate them, and why they matter when it comes to getting approved. What Are Debt Service Ratios? Debt service ratios measure your ability to manage your financial obligations based on your income. There are two key ratios lenders care about: Gross Debt Service (GDS) This looks at the percentage of your income that would go toward housing expenses only. 2. Total Debt Service (TDS) This includes your housing costs plus all other debt payments—car loans, credit cards, student loans, support payments, etc. How to Calculate GDS and TDS Let’s break down the formulas. GDS Formula: (P + I + T + H + Condo Fees*) ÷ Gross Monthly Income Where: P = Principal I = Interest T = Property Taxes H = Heat Condo fees are usually calculated at 50% of the total amount TDS Formula: (GDS + Monthly Debt Payments) ÷ Gross Monthly Income These ratios tell lenders if your budget is already stretched too thin—or if you’ve got room to safely take on a mortgage. How High Is Too High? Most lenders follow maximum thresholds, especially for insured (high-ratio) mortgages. As of now, those limits are typically: GDS: Max 39% TDS: Max 44% Go above those numbers and your application could be declined, regardless of how confident you feel about your ability to manage the payments. Real-World Example Let’s say you’re earning $90,000 a year, or $7,500 a month. You find a home you love, and the monthly housing costs (mortgage payment, property tax, heat) total $1,700/month. GDS = $1,700 ÷ $7,500 = 22.7% You’re well under the 39% cap—so far, so good. Now factor in your other monthly obligations: Car loan: $300 Child support: $500 Credit card/line of credit payments: $700 Total other debt = $1,500/month Now add that to the $1,700 in housing costs: TDS = $3,200 ÷ $7,500 = 42.7% Uh oh. Even though your GDS looks great, your TDS is just over the 42% limit. That could put your mortgage approval at risk—even if you’re paying similar or higher rent now. What Can You Do? In cases like this, small adjustments can make a big difference: Consolidate or restructure your debts to lower monthly payments Reallocate part of your down payment to reduce high-interest debt Add a co-applicant to increase qualifying income Wait and build savings or credit strength before applying This is where working with an experienced mortgage professional pays off. We can look at your entire financial picture and help you make strategic moves to qualify confidently. Don’t Leave It to Chance Everyone’s situation is different, and debt service ratios aren’t something you want to guess at. The earlier you start the conversation, the more time you’ll have to improve your numbers and boost your chances of approval. If you're wondering how much home you can afford—or want help analyzing your own GDS and TDS—let’s connect. I’d be happy to walk through your numbers and help you build a solid mortgage strategy.

Everything You Should Know Before Buying a Home

By Diane Gogar • August 6, 2025
Thinking About Buying a Home? Here’s What to Know Before You Start Whether you're buying your very first home or preparing for your next move, the process can feel overwhelming—especially with so many unknowns. But it doesn’t have to be. With the right guidance and preparation, you can approach your home purchase with clarity and confidence. This article will walk you through a high-level overview of what lenders look for and what you’ll need to consider in the early stages of buying a home. Once you’re ready to move forward with a pre-approval, we’ll dive into the details together. 1. Are You Credit-Ready? One of the first things a lender will evaluate is your credit history. Your credit profile helps determine your risk level—and whether you're likely to repay your mortgage as agreed. To be considered “established,” you’ll need: At least two active credit accounts (like credit cards, loans, or lines of credit) Each with a minimum limit of $2,500 Reporting for at least two years Just as important: your repayment history. Make all your payments on time, every time. A missed payment won’t usually impact your credit unless you’re 30 days or more past due—but even one slip can lower your score. 2. Is Your Income Reliable? Lenders are trusting you with hundreds of thousands of dollars, so they want to be confident that your income is stable enough to support regular mortgage payments. Salaried employees in permanent positions generally have the easiest time qualifying. If you’re self-employed, or your income includes commission, overtime, or bonuses, expect to provide at least two years’ worth of income documentation. The more predictable your income, the easier it is to qualify. 3. What’s Your Down Payment Plan? Every mortgage requires some amount of money upfront. In Canada, the minimum down payment is: 5% on the first $500,000 of the purchase price 10% on the portion above $500,000 20% for homes over $1 million You’ll also need to show proof of at least 1.5% of the purchase price for closing costs (think legal fees, appraisals, and taxes). The best source of a down payment is your own savings, supported by a 90-day history in your bank account. But gifted funds from immediate family and proceeds from a property sale are also acceptable. 4. How Much Can You Actually Afford? There’s a big difference between what you feel you can afford and what you can prove you can afford. Lenders base your approval on verifiable documentation—not assumptions. Your approval amount depends on a variety of factors, including: Income and employment history Existing debts Credit score Down payment amount Property taxes and heating costs for the home All of these factors are used to calculate your debt service ratios—a key indicator of whether your mortgage is affordable. Start Early, Plan Smart Even if you’re months (or more) away from buying, the best time to start planning is now. When you work with an independent mortgage professional, you get access to expert advice at no cost to you. We can: Review your credit profile Help you understand how lenders view your income Guide your down payment planning Determine how much you can qualify to borrow Build a roadmap if your finances need some fine-tuning If you're ready to start mapping out your home buying plan or want to know where you stand today, let’s talk. It would be a pleasure to help you get mortgage-ready.