The Bank of Canada increased prime rate by .50% effective today Thursday Dec 8th, 2022. Prime rate is now 6.45%.
What does this mean for variable rate mortgage holders?
If your mortgage is with a lender that adjusts the payment when prime rate changes your payment will be increasing and you will be notified.
For every $100,000 mortgage your payment will increase by approximately $32/month by a prime increases of .50%E.g. if your mortgage is $400,000 your payment will increase by $128/month.
If your mortgage is with a lender that does NOT adjust the payment when prime rate changes your payment amount will remain the same, however the amount that goes towards principal and interest will be adjusted accordingly and your amortization will also increase.
With the current higher interest rates the government has indicated the potential for increased amortizations on existing insured mortgages, however subject to insurer approval. It is a possibility we will see increased amortizations for non-insured mortgages going forward.
In the next couple of weeks the government is expected to announce changes to the existing stress test for qualifying new mortgages which is the greater of the benchmark rate or 2% above the contract rate. It will likely be reduced to the greater of the benchmark rate or 1% above the contract rate.
The latest predictions indicate more rate hikes early next year are likely before levelling off
Here is the history of prime. https://www.mcap.com/Prime-Rate-History
Information provided by Sheryl Elsom https://www.sherylelsommortgages.com
The next scheduled Bank of Canada rate announcement is Wednesday December 7, 2022.
Official Press Release HERE
Please do not hesitate to contact me should you have any questions or would like to discuss further.