If you have a variable-rate mortgage, I’ve got some news for you. One part of it is bad, another part is good and the other part is complete speculation.
Let’s get the bad news over first. As I’m sure you’ve heard, on January 25, the Bank of Canada raised its overnight target rate by 25 basis points, bringing it to 4.50%. The mortgage prime rate is always higher which means your mortgage interest rate will likely be plus or minus 6.70% depending on your unique commitment. The amount of interest you’re paying has now increased and so will your payment. If you have a static payment, you may hit or be closer to your trigger point.
Now to speculate. Looking ahead, the Bank said it “expects to hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases,” but that it is also “prepared to increase the policy rate further if needed.” There is a growing consensus that the Bank has now reached—or is nearing— the height of this rate-hike cycle. Officials from the Bank of Canada have indicated that its future rate decisions will be driven by economic data. The next announcement will take place on March 8. But, unfortunately, there is no way of knowing what will happen for sure.
Let’s end on a good note – you have options. Most variable-rate mortgages will allow you to convert to a fixed rate with your current lender. Or if you’d like more options, I can review your situation to see if another lender would be a better fit. Fixed rates are driven by mortgage bond yields – which are on a downward trend. If you’re concerned about the cost of your payment, we may be able to figure something out to help ease the stress.