According to analysts, interest rates in Canada will continue to rise until 2020. This means that borrowers will be eligible for lower mortgages, while homeowners can expect Mortgage payments rise at the time of renewal of their normal or floating rate mortgage.
Why are rates rising?
Canada’s growing economic environment, especially since the finalization of the US-Mexico-Canada Agreement (SCMTA), is one of the reasons for rising interest rates. Some economists speculate that the interest rate will gradually increase in 2019 following the announcement of the Good Bank in October.
What is the schedule for Good Bank announcements?
The Good Bank makes 8 announcements a year where the Canadian policy rate can go up or down depending on the outlook for the Canadian economy. The prime rate is the interest rate charged by commercial banks to their prime clients; it is based on the federal funds overnight rate (ie, the interest rate used by the major banks for interbank loans and borrowings). The Good Bank is expected to announce a rate hike on October 24, 2018.
When was the last time the key rate was above the 5% threshold?
The current policy rate is 3.7%. Some economists predict that the key rate may rise to 6% by 2020. This will be a significant increase for most Canadians, since the policy rate has not been above 5%. % since 2008!
What does this mean for homeowners?
Simply put, borrowers with a fixed rate mortgage will not see any immediate change as the interest rate will stay the same until the end of the mortgage term. On the other hand, borrowers with variable rate mortgages will pay the increase fee as mortgage payments increase as the Good Bank rate increases. In this light, you need to determine whether a fixed or floating rate mortgage is the best option for you in the next few years.