Bank of Canada Increases Overnight Lending Rate
As expected the Bank of Canada increased their overnight lending rate by 0.25%, raising the Prime Lending Rate for most if not all of the lenders to 2.70%. Here are a couple of things that you need to know.
Prime Rate Change: Most if not all of the lenders changed their prime lending rate from 2.45% to 2.70%. This change is effective March 03, 2022 for most lenders. This means if you have a Variable Rate, your payments will change for your next payment, that or the amount paid to interest will be modified. This depends on the type of Variable rate you have.
Who does this affect: This change will affect every borrower with a variable rate mortgage or those wishing to obtain a new Variable Rate mortgage. This change will not change the spread on the variable rate (example Prime Minus 1.0%). The Variable Rate change does not affect Fixed rates.
When will the Payment Amount Adjust: For most lenders the payment will adjust on the 2nd regularly scheduled payment following the rate change date. For monthly payments, the April 1st payment in most cases won’t change, but the payment May 1st will reflect the new payment amount. For Weekly payments, assuming payments are on Friday, if you had a payment on Friday March 4th, it would not change, for the payment on Friday March 11th, the payment would reflect the new amount.
My opinion on Variable Rates: Although Variable rates have increased, Variable rate mortgages are still really low. You could expect a rate of 1.70% on a new Variable Rate mortgage, possibly lower. This is still quite a bit lower than fixed rates which are pushing the high 2% to low 3% range. So if you have any tolerance to a little risk, then these still might be for you. Further, depending on your circumstances it may be a better option, for example if you were planning to sell and break the mortgage, you would do much better with a variable rate as they are cheaper to get out of then fixed rates.
Save the Date: The Bank of Canada is scheduled to meet again on Wednesday April 13, 2022.
Please don’t hesitate to contact me if you would like any additional information or if you are simply in need of any advice with respect to this or anything mortgage related.
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Some conditions may apply. Rates are subject to change. Subject to lender / insurer approval.