The Bank of Canada hiked its key interest rate Wednesday by a quarter percentage point, bringing the rate to 4.75 per cent - the highest it's been since April 2001. The hike is aimed at quelling inflation, which has proved stubborn, not moving down quickly enough toward the central bank's target of two per cent. However, the hike is also bound to weigh on those hunting for homes or holding mortgages.
Last Updated Wednesday, June 7, 2023 3:46PM EDT
Mortgage rates tend to move in tandem with interest rates, so when one goes up, the other is likely to follow.Canadians buying homes have two kinds of mortgages they can choose between - fixed rate or variable. Fixed-rate mortgages allow borrowers to lock in the interest rate they will pay for a set amount of time, while variable-rate mortgages fluctuate with interest rates.
For those who have fixed payments on a variable rate mortgage, he predicts they will exceed their trigger rate if they haven't already - the point where your payments are no longer enough to cover all of the interest you've accrued since your last payment. This means your entire mortgage payment is covering interest, so none of it is allocated toward principal.
They can also help you explore options for increasing your payments, making lump sum payments or slowing down your payments.
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