Mortgage Basics

A Recap of 2022: Interest Rates, Housing Market, and Mortgages

A Recap of 2022: Interest Rates, Housing Market, and Mortgages
Written by
  • Tvine
| Jan 30, 2023
Reviewed, Jun 16, 2023
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    Buckle up! We’re taking a trip back in time to the not-so-far-off 2022 to see exactly what went on now that it’s in the rearview mirror. The goal: Go over how much interest rates increased, how it affected home prices, the impact on buyers and homeowners, and what it all means. Ready? Let’s travel.


    Key Highlights

    • Interest rates increased 7 consecutive times, bringing the prime rate to 4.25% at the close of 2022 
    • Inflation was superheated at 9.1% in the summer, dropping to 6.3% in December 2022. BoC’s target remains at 2%. 
    • The housing market is entering a more balanced pace where prices are dropping for buyers.

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    Interest Rates Increase 7 times. 

    Lucky 7 wasn’t so lucky this year, at least in the world of mortgages, personal loans, and credit cards. 7 consecutive rate hikes brought the overnight rate from 0.5% to – drum roll, please – a whopping 4.25%. 

    While these low rates were pretty much an anomaly for our times, brought on by the once-in-a-lifetime pandemic (knocking on wood as we write), it still was a sort of sticker shock to watch them ever-increasing. 

    The core reason this happened? Inflation got a bit weird. How weird?…Let’s discuss. 

    Inflation reached an unprecedented level of 9.1%

    Source: Bank of Canada This image shows the recent increases in all CPI measurements for Canada and breaks down the total CPI increases into the trim, medium, and common CPIs separately – as well as those we are not concerned about for our purposes here.

    After 9 years of hovering around the target of 2%, the hockey stick-like increase in the Consumer Price Index chart above was too obvious, and painful to ignore any longer.

    That’s what led to the aforementioned rate hikes. Many argue that action could have and should have been taken in 2021 when it was fairly clear we were taking off, quickly, in the wrong direction. 

    In an attempt to quell this off-the-charts increase in inflation, the central bank went into overdrive to water down the spending power of the Canadian economy and get the inflation rate back to the 2% target it desires. . 

    To do that, they raised the cost of borrowing, exponentially. Did it work? So far, it seems to be having the intended effect, as now, in early 2023, the rate sits at 6.3%,  and it continues to be the worst claim for achievement ever. 

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    The Housing Market Went From Peak Levels To Low Levels 

    If you were to tell someone in 2021 that the hottest real estate market in recent times would end swiftly, they’d likely roll their eyes. “They’ve been saying that for years?!” they would argue.  Today, the housing market is seeing noticeable drops across the country from where it stood earlier. 

    In just the last 6 or so months, nesto’s data reports a drop in average price in Ontario of 11.1%. While this may seem like pennies, when a home was priced at $1 million, 11.1% is a pretty decent price drop.

    All this is to say: Buyers, strap into your hunting boots because the housing market is about to get way more balanced in 2023, and if you’re ready to buy, it will be the time to do it. 

    Remember: You marry the house price, and you date the rate. Refinance for a lower rate when it inevitably drops, and inflation is under control (the time for that? Unseen, but it will happen, all things that go up must come down). 

    Final Thoughts

    When it comes to 2022, it was a year unlike any other. We peaked, plateaued, and had head-scratching events that were as anxiety-inducing as anything. That all led us to where we are today: In 2023. Looking forward, we see fewer surprise rate hikes, a tougher market for sellers but a better one for buyers, and a plethora of tales from a time when things got just plain weird.


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