The Bank of Canada (BoC) is set to issue an interest rate update on Wednesday, September 6 at 10 a.m.

This will mark the sixth interest rate announcement of 2023. Two further announcements are scheduled for October 25 and December 6 this year.

In 2022, the BoC hiked its interest rate seven times. Then, in January 2023, another increase followed, bringing the key rate to 4.5 per cent.

The Bank held its key rate at 4.5 per cent, precisely as experts predicted, until June 7, when it was raised to 4.75 per cent.

The most recent interest rate announcement came on July 12, with the BoC bringing the key rate to 5 per cent in an effort to relieve inflation.

According to Statistics Canada, Canada's inflation rate fell to 3.6 per cent in July, but consumer spending has remained high this year compared to 2022.

Ratehub.ca co-CEO and president of CanWise mortgage lender James Laird shared his thoughts and expectations for the upcoming BoC announcement.

"The Bank chose to raise at the last two announcements, so a raise is certainly still on the table," he said. "Borrowers should be budgeting for a rate hike so that they are prepared if it does happen."

Laird advises those shopping for a fixed-rate mortgage to submit a rate hold before the announcement because, depending on what's to come, bond yields could push up further, which will cause fixed rates to follow.

"Anyone with a variable rate or a home equity line of credit (HELOC) will be hoping for a hold next week and guidance that further rate hikes are unlikely," shared Laird.

"If rates go up further, it will put downward pressure on home values, which have plateaued over the summer. On the other hand, if the Bank chooses to hold, it could cause buyers to come off the sidelines, thereby increasing demand," he added.

If there's an interest rate hike

Laird warns that if the BoC chooses to hike rates further, the stress test will increase, making it harder for Canadians to qualify for homes.

Ratehub.ca used its mortgage payment calculator and the average home price in Canada — $668,754, per the Canadian Real Estate Association (CREA) — to determine what would happen in the following hypothetical situation if a 25-basis-point rate is announced.

"A homeowner who put a 10 per cent down payment on a $668,754 home with a five-year variable rate of 5.95 per cent amortized over 25 years (total mortgage amount of $620,536) has a monthly mortgage payment of $3,952," Ratehub said in an email.

"If the Bank of Canada announces a 25-basis point rate increase next week, their variable mortgage rate will increase to 6.20 per cent, and their monthly payment will increase to $4,044."

This means that the homeowner will pay $92 more per month, or $1,104 per year, on their mortgage payments.