Yesterday, the Bank of Canada announced the first rate increase to the daily rate it charges banks from 0.25% to 0.5%. Does this affect you?
That depends on whether you have a mortgage or a line of credit, and if so, what type. If you have a fixed rate mortgage, then no - it does not affect you, at least until your mortgage is up for renewal. If you have a variable rate mortgage or line of credit, then yes, it might affect you - a little bit.
The rate change that has been announced will affect people to the tune of about $24.50/month per $100,000 borrowed. For example, if you have a $200,000 variable rate mortgage, then your monthly payment will increase by about $49 i.e. one night out at the movies for the family (or 1 less coffee/donut per day at your local Tim's), if you keep the same amortization period. Or, your variable rate mortgage could be set up so that the monthly payment stays the same, but the amortization period may be extended a bit to account for the rate increase.
As you can see, we're still enjoying the benefits of historically low interest rates. And even with rate increases happening this year, we're still at the low end. Back in the early 80s, interest rates were up around 18-20%. Urgh. Do I think we're in for a return to these levels? Certainly not. If anything, interest rates may increase another 0.5% by the end of the year. And, that's not a huge deal.
If you know anyone (including yourself) who is interested in buying or selling, just give me a call. I'm ready when you are.
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