We Answer 6 Burning Questions!
What is a BoC interest rate?
- It’s essentially the interest rate that BoC sets for major financial institutions to use when lending one-day (overnight) funds to each other. Just remember this is different from the prime rate. Any adjustments are usually announced on eight fixed dates each year. See below the dates for interest rate announcement for the rest of this year:
| April 13th | Bank of Canada Interest Rate Announcement |
| June 1st | Bank of Canada Interest Rate Announcement |
| July 13th | Bank of Canada Interest Rate Announcement |
| September 7th | Bank of Canada Interest Rate Announcement |
| October 26th | Bank of Canada Interest Rate Announcement |
| December 7th | Bank of Canada Interest Rate Announcement |
Will this change your qualification for mortgage?
- This most definitely will NOT change your qualification. The government requires potential home buyers to qualify under the stress test – of which the rate is unchanged. As of June 2021, the stress test qualifying rate had increased to 5.25%. To read more about the stress test, visit: Ratehub.ca
Will your mortgage payment change?
- Maybe – it’s possible! With a static payment your payment amount does not change, but the amount implied to principal and interest does!
You might wonder, should I lock in?
- Fixed rates are already about 3-3.5% with most lenders, you will likely end up paying more with a fixed rate vs. if your current variable were to go up a couple of times. If you break your fixed term early, you’ll have to end up paying a percentage of the balance.
How much will your payment change by?
- For every $100,000 it’s about a $12 increase with a variable rate (non static loan). For example, if your mortgage is $300,000 you will see an increase of $36/month.
What should I do now?
- With the interest rates changing you might feel a sudden stressor and wonder if you should consider staying with the variable or go with a fixed rate to be secure. Think of the long-term course – the fixed rates are already higher than current variable, if the bank does raise the rate 4-5 more times you will be much safer to stay at variable as it won’t possibly be as high. If at any point you do wish to switch over to fixed rate market you can do so any time with no penalty or cost, but once you do if you end the fixed term early there’s a penalty of 3 months interest required.
If you have any questions or are thinking buying, selling, or investing give us a call today and we’re happy to help you & connect you with the best professionals to make the process as seamless possible!
Resources:
https://www.ctvnews.ca/business/how-interest-rate-hikes-could-affect-your-mortgage-payment-1.5762554