09/03/2026
📊 Interest Rates vs. Inflation: What Does the Last 10 Years Tell Us?
Over the past decade, Canadians have experienced some major changes in both inflation and interest rates.
From 2016 to 2025:
🏦 Bank of Canada overnight rate: moved from 0.50% → 5.00% → 2.25%
📈 Overall inflation: increased approximately 28%
🏠 Household goods & furnishings: increased approximately 9%
The biggest inflation shock came in 2022, when overall CPI reached 6.8% and household goods inflation reached approximately 4.6%.
The Bank of Canada responded by rapidly increasing interest rates. But here's the important part:
Interest rates don't control inflation overnight.
Monetary policy works with a lag. Higher borrowing costs gradually reduce spending and demand, which can eventually help bring inflation down.
By 2024, household goods inflation had actually turned negative, while overall inflation had fallen considerably from its 2022 peak.
💡 What does this mean for mortgage borrowers?
The headline inflation number is only part of the story.
Your personal financial situation can be affected by:
• Mortgage interest costs
• Housing prices and rents
• Food and transportation costs
• Household expenses
• Income growth
• Your mortgage term and payment structure
That's why choosing a mortgage isn't simply about finding "the lowest rate."
It's about understanding your overall financial position, risk tolerance, cash flow and future plans.
As a mortgage professional, my goal is to help clients understand the numbers and choose a mortgage strategy that makes sense for their situation.
Have questions about where interest rates may be heading or how your mortgage could be affected? Let's talk.
