In today’s economic landscape, inflation is a hot topic that directly affects homeowners and potential buyers. Let’s break down the current trends and what they mean for your mortgage.
Current Inflation Trends 
As of June 2024, the Consumer Price Index (CPI) stands at 2.7%. However, when we remove mortgage interest from this equation, the figure drops to 1.43%. This difference highlights the significant role that mortgage interests play in our overall inflation picture.
Key Points:
• Overall inflation: 2.7%
• Inflation excluding mortgage interest: 1.43%
• Mortgage interest contribution to CPI: 1.24%
How Inflation Affects Mortgage Rates:
Inflation and mortgage rates have a complex relationship. Generally, as inflation rises, we can expect mortgage rates to increase as well. This is because lenders need to ensure that the interest they charge outpaces inflation to make a real return on their loans.
However, the Bank of Canada’s response to inflation also plays a crucial role. When inflation is high, the Bank may increase its policy rate to cool the economy, which in turn can lead to higher mortgage rates.
Strategies for Homeowners in an Inflationary Environment
1. Review the pros and cons of having a variable mortgage or HELOC vs. a traditional product depending on you risk tolerance.
2. Consider Fixed-Rate Mortgages: In a rising inflation environment, locking in a fixed-rate mortgage can provide stability and protection against potential rate fluctuations.
3. Accelerate Payments: If possible, making extra payments can help reduce your principal faster, saving you interest over the long term.
4. Stay Informed: Keep an eye on economic indicators and Bank of Canada announcements to anticipate potential changes in mortgage rates.
5. Review Your Budget: As inflation affects the cost of goods and services, it’s crucial to reassess your budget to ensure you can comfortably manage your mortgage payments.
6. Consult with a Mortgage Professional: An expert can help you navigate the complexities of the current market and find the best strategy for your unique situation.
At Cultivate + Evolve Financial, we’re here to help you understand these trends and make informed decisions about your mortgage. Don’t hesitate to reach out for a personalized consultation.
