Posted on
January 25, 2023
by
Aaron Muller
The Bank of Canada today increased its target for the overnight rate to 4½%, with the Bank Rate at 4¾% and the deposit rate at 4½%. The Bank is also continuing its policy of quantitative tightening.
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 when prime rate changes.
For every $100,000 mortgage your payment will increase by approximately $17/month by a prime increase of .25%
E.g. if your mortgage is $400,000 your payment will increase by $68/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. This would increase the amortization. Your payment will only increase if rates go higher than the “trigger rate” on the documents you signed with your notary/lawyer. The “trigger rate” is different for every mortgage so please refer to your mortgage documents.
The government is reviewing current loan to value and debt servicing guidelines and expected to announce changes for qualifying new mortgages by the end of April 2023.
Economists are still predicting rates to decline in the next year or so and expecting prime rate to end up in the 4.5%-5% range.
The Bank of Canada has indicated that this could be the last rate increase for some time.
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 March 8, 2023.
Official Press Release HERE
Please do not hesitate to contact me should you have any questions or would like to discuss further.
Thanks,
Aaron