Impact of the Key Interest Rate Increase
The key interest rate is the rate at which the Bank of Canada lends money to the country’s various financial institutions. For the first time in 7 years, the Bank of Canada raised its key interest rate to 0.75%, an increase of 25 points. While it is a sign that our economy is doing well, what impact will this increase have on mortgage rates?
According to the Québec Federation of Real Estate Boards (QFREB), the hike in the key interest rate will have a direct impact on variable-rate mortgages, as well as on short-term fixed rate mortgages (6 months and 1 year). Mortgage lines of credit and all types of loans associated with the key interest rate will also be influenced by this increase.
The QFREB believes that we will most likely see a gradual increase in 5-year mortgage rates from now until the end of the year. With rumours of this increase imminent, some banks already started to increase their rates last week.
Minor impact on payments
Overall, the impact of this increase on mortgage payments will not be significant. For example, for a total loan of $250,000 at an interest rate of 2.70%, a borrower will see their monthly payment increase from $1,144.97 to $1,176.71 at a rate of 2.95%.