Bank of Canada Raises Rate by 1%
Last week, the Bank of Canada raised its key interest rate by 1%.
The prime rate will be increased from 3.70% to 4.70%. Therefore, for those who have a variable rate credit product, payments may increase by approximately $48.00 for every $100,000 loan.
The stress test qualifying rate has also increased. For every $100,000 of income, Canadians would have been able to qualify for approximately $550,000. After the increase, the qualifying amount for every $100,000 of income is now approximately $497,500.
Inflation has continued to be higher than expected, and will likely remain around 8% for the next few months.
The Bank has continued raising rates due to the economy being in excess demand, high inflation, and more businesses and consumers expecting inflation to be higher for longer.
What happens now?
Banks and other financial institutions are to follow the Bank of Canada and increase their prime lending rate. This rate is used to price variable rate mortgages as well as personal and home equity lines of credit (HELOCs).
Those with a fixed rate mortgage however, will see no change to their rates.
We know that you may be surprised with the 1% increase as many of us expected 0.75% only. We would love for you to reach out to us so we can chat about your personal situation together and how this new change may affect you!