Month: July 2018

The Bank of Canada has increased its key overnight rate from 1.25% to 1.50%. This rate hike didn’t come as a surprise.

In turn prime lending rate of most banks  like Scotiabank, CIBC, RBC has increase by 0.25% from 3.45% to 3.70%. TD Bank has their own prime rate that increased from 3.60% to 3.85.

How does this affect you?

If you have a variable rate mortgage, your rate will go up and your regular monthly scheduled payment will increase as well. The 0.25% in rate increase equals approximately $12 increase in your monthly payment per every 100K borrowed. So on a 300K mortgage, the payment will increase by approximately $36/month. Hardly a budget breaker.

If your variable rate mortgage is with a lender like TD, your payment will not change. More of your payment will go towards interest and less towards principal.

If you currently have a discount of 0.50% below prime, your new rate will be 3.20% (3.70% – new prime rate less 0.50%).

Also, if you have a home equity line of credit (HELOC), personal line of credit or any other loan that is prime rate based, your rate will go up by 0.25%.

What to expect next?

Nobody has a crystal ball but what we are projecting for the future is that this may be the last rate hike for a while. Factors such as impeding trade war with the US and what’s happening with NAFTA could postpone future rate hikes for a while.

Conclusion: If your mortgage is a variable rate mortgage, stay variable! The benefits of staying in a variable product far outweigh a fixed rate. Primarily, a low interest rate compared to fixed rates plus the lowest penalty (three month interest) as opposed to a fixed rate mortgage.