As a home owner, or someone who is looking at purchasing a home, you’re probably wondering what today’s announcement from the Bank of Canada really means. Today, for the first time in 7 years, the key interest rate was increased by a 1/4 percent, setting the rate at 0.75%. This directly changes the Prime lending rate, which Banks and Mortgage Lenders use to set their rates.
It’s no secret that the housing market here in Canada has been hot. In the Waterloo Region alone we have seen prices increase month over month by over 30%, according to the Kitchener-Waterloo Association of REALTORS®. Since the Bank of Canada has held the key interest rate for so long, it is only natural that in a strong economy this rate would eventually increase. Current mortgage rates have been affected by the market as well: rates have been inflated because of market pricing, and the constant demand for housing. Mortgage lenders are looking to take advantage of this demand and cash in while they can. With new Affordable Housing legislations and a natural cooling in the market, it’s expected that interest rates will go down again as the market softens towards the end of the year. The Bank of Canada has indicated that they need more economical data before commenting on upcoming announcements.
So now what? If you are a homeowner – don’t panic! If you have a fixed-rate mortgage, you are not impacted by this change, however, if you currently have a variable-rate mortgage your rate will fluctuate with this key rate change. If you are considering locking in your rate with your lender, call us first. We’re happy to speak with you about rate trends, and what the best options are for you to save money in the long run. As a first time home buyer, make sure that you speak with a mortgage professional to ensure that you are getting a great mortgage product that will work for you through the coming market changes…And always remember: