The Bank of Canada finally increased its benchmark rate to 0.75 percent (up 0.25 %) after seven years of leaving the key interest steady and even reducing it a couple of times.
All five major Canadian banks followed by increasing their own prime lending rates by the same 25 basis points (0.25%). While this doesn’t sound like great news, the fact is that the Canadian economy is doing better than expected in 2017, employment is strong, mortgage defaults are at record lows and interest rates are still close to historical lows.
What this means for you.
If you currently have a variable rate mortgage, home equity line of credit, or a combination of both, you will see an increase in the interest you pay and depending on the type of variable rate mortgage you may also see an increase in your payment. This generally means $18 more each month for every $100,000 of mortgage balance. If you have a fixed rate mortgage you won’t see any change for the remainder of your term but you might face higher interest rates at the time of renewal.
Interest rates are just one component of your mortgage. Other factors such as amortization (number of years to pay off your mortgage), payment frequency, and prepayment options all have a significant impact on the amount of interest you actually pay.
Home ownership is an important long-term decision that can greatly enhance your overall financial well-being and having access to the right mortgage solution is just as important. With current speculation that the Bank of Canada might increase the rate one more time this year, it makes sense to get a pre-approved mortgage in hand before shopping for your first or next home.
I’m here to answer all your mortgage questions, call or email me today – 905.903.4799, SWhite@MortgageAlliance.com .