Canadians with mortgages brace for big Bank of Canada rate hike
BNN Bloomberg
The Bank of Canada is gearing up to announce its next rate move this Wednesday, with Bay Street expecting a 50 basis-point increase to put Canadians with variable rate mortgages on edge and keep some prospective homebuyers on the sidelines.
The Bank of Canada is gearing up to announce its next move on interest rates this Wednesday, with Bay Street forecasters expecting a 50 basis-point increase to put Canadians with variable rate mortgages on edge and keep some prospective homebuyers on the sidelines.
With variable rate mortgages pegged to the Bank of Canada's decision, "interest rate hikes will begin to bite soon," BMO Capital Markets' senior economist, Robert Kavcic, said in an interview.
The big banks, Canada's main mortgage lenders, already moved their prime rate from 2.45 per cent to 2.70 per cent after the Bank of Canada raised its overnight rate from 0.25 per cent to 0.50 per cent in March.
This sets the stage for further pressure on borrowers come Wednesday.
Based on that 2.70 per cent prime rate and a discount of one per cent – lenders typically offer discounts ranging from 0.60 per cent to one per cent – a homeowner with a variable rate mortgage would have seen their monthly mortgage payment go from 1.45 per cent to 1.70 per cent, explains Leah Zlatkin, mortgage expert with LowestRates.ca.
"On a home priced at $800,000 with a 15 per cent down payment amortized over 25 years with that variable rate in place, it’s an increase of about $85 per month," she said in an interview. Another half-point increase would add around $170 a month on top of that.
