Here’s what the interest rate hike will mean for homeowners

While the Bank of Canada raised its key rate on Wednesday, holders of variable-rate mortgages are likely to have (still) hurt their wallets. The rate now calculated at 4.75% is also the highest since 2001, reports Noovo Info.

Remember that the central bank is aiming with this measure to bring inflation back to around 2% on an annual basis, which is not yet the case.

In the meantime, homeowners with variable rate mortgages and first-time buyers may suffer.

Banks have also started to increase their prime rate only a few hours after the announcement made by the central bank.

Those with a fixed rate mortgage are spared this increase, but those with a variable rate mortgage will pay more now.

For example, a person who bought a house for $716,083 with a 10% down payment and a variable rate of 5.5% over five years amortized over 25 years was paying $4,075 per month, calculates the co-director general of the site, James Laird, in a press release.

With the hike on Wednesday, he will now have to pay $4,173 per month, or $98 more.

“Fixed rates had already started to rise in anticipation of a possible rate hike and will rise further now that we know the bank has raised rates,” Laird said. Thus, all the people who have a fixed rate mortgage and who wish to renew it will also have consequences on the amount they will pay.

“Fixed rates are also higher than the rate many renewers are likely to be at right now,” said Olympia Baldrich, vice president of retail products at TD Bank, in an interview with The Canadian Press. .

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2023-06-09 18:03:24

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