The Bank of Canada raised its key interest rate today–as most people expected. Canada’s prime rate jumped 0.25% as a result. It’s the first such increase in over 13 months.
Variable rate mortgages also rose 0.25%. (Although you may still be able to get a 5-year variable under 5.25%.)
If you have a variable now, and don’t have a “hold-the-payment” option, here’s an example of how your payments might rise.
While adjustable rate mortgages are rising, however, fixed rate mortgages could potentially drop in the near term. That’s because Canada’s key bond rates fell about 1/10% today. Apparently traders now think the Bank of Canada is less inclined to keep raising rates after their next meeting.
In a statement today, the Bank of Canada said, “Some modest further increase in the overnight rate may be required to bring inflation back to the [2%] target over the medium term.”
The Bank of Canada’s next interest rate meeting is September 5. Economists surveyed by Bloomberg generally expect another 0.25% hike at that meeting. Most feel that rates will then hold pat for the rest of the year.