Globe abd Mail ~ March 30th, 2023

If you’re riding out a floating-rate mortgage, you’re likely wondering when the prime rate will drop.

The 22-year high in Canada’s prime rate has caused financial hardship for many – including 50-per-cent-plus payment increases on most adjustable-rate mortgages.

Compared with a year ago, most families with adjustable-rate mortgages are forking out over $700 a month more.

What’s keeping rates high?

If you listen to analysts, most say some version of the same thing: We need a slower economy and lower inflation to see lower interest rates from the Bank of Canada.

But if you had to boil it all down to just one thing that could ensure much lower rates, it’s a significant rise in unemployment.

Surging unemployment decreases competition for workers and reins in wages and consumer spending. That takes pressure off things such as raw materials and supply chains, and keeps wage increases from driving up prices excessively.

In short, when demand is low, businesses can’t get away with charging more. As a result, inflation expectations ease, and eventually, inflation falls back to the central bank’s 2-per-cent target.

Click here to read the full article.