Bank of Canada, today, raised its benchmark interest rate today by a full percentage point to bring it to 2.5% in total. That's the biggest increase in a day since 1998.
So, what does this mean, and how does this impact our variable term mortgage and LOC, Monthly Payments? Now, with this hike, the bank's rate will impact the payments and the interest portion within the payments, which means, you will be paying less principal portion and more interest.
A variable rate loan benefits borrowers in a declining interest rate market because their loan payments will decrease as well. However, when interest rates rise, borrowers who hold a variable-rate loan will find the amount due on their loan payments also increases.
When applying for a mortgage, the interest rate you're offered depends on a few factors, such as:
The overnight rate set by the Bank of Canada (BoC), is the interest rate banks borrow at and lend from each other in the market overnight
Your credit rating
Your decision between a variable or fixed-rate mortgage
The term or length of the mortgage
Experts agree that with inflation still stubbornly at 7.2% and trending upwards to 9.1%, the Bank of Canada has moved up to break consumer expectations of high inflation.
