Yesterday the Bank of Canada overnight interest rate went up for the 3rd time in just over 6 months, on the back of an economy getting stronger. This has already lead to lenders raising their prime rates, effecting variable rate mortgages, and the Big 6 banks increasing the posted fixed rates.
So what effect will this interest rate hike have on our mortgage payments?
A quarter point interest rate hike represents about $13 per month, per $100,000 mortgage, for the average variable rate mortgage - about $52 a month extra on the average $400,000 mortgage balance.
This might not sound like much, but add that to the previous 2 rate hikes, these same mortgage holders could now be paying about $156 a month more than they were just over 6 months ago.
Currently, the majority of local homeowners won't be affected by the interest rate hike, as 50% have no mortgage, and more than 80% of the remaining mortgage payers are on a 5 year fixed rate. Even home owners with variable-rate mortgage won't see monthly payments increase, with a rise in interest rates - these owners will just pay back a little more interest and a little less prinicipal each month.
So, once again, along with the recent mortgage rule changes, these rate hikes effect the first time home buyer the most. Once again, easy targets for our governing bodies. Your thoughts?