The Bank of Canada today announced that it is raising the prime rate by one-quarter of a percent. Canada’s economy is growing faster than expected along with inflation. But uncertainty about Europe’s debt crisis will affect how quickly interest rates can rise. Click here to read the full Press Release.
If you are curious about “What Goes Into A Rate Decision” the Globe & Mail has created a great interactive tool. It’s quick and simple to read click the link above.(The different panels are hidden across the top of the text box. Click on the Title to get the panel.)
What does this mean to you?
If you are in a variable rate mortgage your monthly mortgage payment will increase over the next couple of weeks. Expect a letter from your lender indicating the new rate and payment amount. The prime rate will increase to 2.50%. This will also effect your lines of credit that are based on prime as well.
Should I lock in?
Up until about 4 weeks ago most observers were expecting the prime rate to increase by 0.50%. The 0.25% increase that we have seen today indicates that the so called recovery isn’t as strong as expected. While there will be a trend towards higher prime rate in the future we feel that it will be a very slow and gradual increase. We would advise to stay in your variable rate mortgage because if you were to lock in today you would be looking at a fixed rate of 4.59% which is significantly higher than the effective rate on your variable. In the mean time you can continue to enjoy a low payment and have the ability to pay more off your mortgage.
Mortgages are very dynamic and the guidance that we offer is based on the circumstances of each individual. If you would like to review your mortgage to make sure that you are still on track please call us to have a quick chat. 416.461.0204