As predicted, the Bank of Canada raised its benchmark interest rate yesterday for the first time since 2018. Prime has increased from 2.45% to 2.7%.
Positive Highlights from today’s announcement:
- Economies are emerging from Omicron quicker than anticipated
- Household spending remains consistent and should continue to increase
- COVID restrictions have eased and supply demand is improving.
“Economic growth in Canada was very strong in the fourth quarter of last year at 6.7%. This is stronger than the Bank’s projection and confirms its view that economic slack has been absorbed.”
Concerns noted in today’s announcement:
- The impact of the Ukraine/Russia situation is affecting global economies
- All are trending cautiously with new COVID variants still among us
- Poor harvests and higher transportation costs have pushed up food prices.
What does all this mean for your mortgage?
- This means that interest payments on products like variable rate mortgages and lines of credit will now be higher than they were last month.
- Mortgage holders shouldn’t rush to make radical changes to their mortgage rate because of the interest rate increase.
- There are pros and cons to both variable and fixed mortgages. Remember, a 25 bps increase is equivalent to an increase in payment of $12/$100,000 of mortgage so with a $400,000 mortgage, the payment will increase approximately $50/month.
- The average 5-year fixed rate is sitting around 2.99% to 3.24%.
Remember, if you’re worried about how these rate changes will affect your finances, I am always here to provide advice.Let’s book a time to talk! Schedule an Appointment
Read the full BoC report here.