There's more bad news for those applying for a loan, a mortgage or renewing an existing one.
The Bank of Canada announced Wednesday morning it was raising its key lending rate to 5 per cent, up a quarter-percentage-point from 4.75.
The last time interest rates were this high was in March 2001.
"Canada's economy has been stronger than expected," it said. "Consumption has been surprisingly strong at 5.8 per cent in the first quarter. While the central bank expects consumer spending to slow in response to the cumulative increase in interest rates, recent retail trade and other data suggest more persistent excess demand in the economy."
Immigration growth has helped ease the shortage of workers, although conditions are still tight. It also boosted consumer spending and demand for housing at a time when new construction and real estate listings lag.
The bank expects growth in the Canadian economy to slow to an average of one per cent in the second half of 2023 before it picks up to 1.2 per cent in 2024 and 2.4 per cent in 2025.
Globally, it anticipates growth of 2.8 per cent this year, 2.4 per cent next, and 2.7 per cent in 2025.
The bank started raising interest rates last summer when inflation peaked at 8.1 per cent. In June, it was 3.4 per cent, "a substantial and welcome drop," said the bank, but still above its target of 2 per cent. It anticipates the rate to hover around 3 per cent in the year ahead before reaching the target in the middle of 2025.
The next scheduled announcement from the Bank of Canada is September 6.
