Bank of Canada Rate Increase: What It Means for Your Mortgage
The Bank of Canada has increased its key interest rate by a quarter of a percentage point to 2.50%, its first increase since July 2023.
If your first thought was, "Does this mean my mortgage payment is going up?" you're certainly not alone.
The answer depends on the type of mortgage you have. And to clear up one common question: 2.50% is the Bank of Canada's key rate, not the mortgage rate available to borrowers.
If you have a variable-rate mortgage
Variable mortgage rates are generally tied to your lender's prime rate. If your lender raises prime, your mortgage rate will generally rise as well.
With some mortgages, that means a higher payment. With others, your payment may stay the same, but more goes toward interest and less toward paying down what you owe. Your lender's terms determine how and when payments change.
If you're unsure which type you have, I'm happy to help you check.
If you have a fixed-rate mortgage
Your rate and regular mortgage payment stay the same until your current term ends.
New fixed mortgage rates don't automatically move by the same amount as the Bank of Canada's rate. They're influenced by other factors, including the bond market, so this announcement alone doesn't tell us where your next fixed rate will land.
If you have a home equity line of credit
Most home equity lines of credit are tied to prime. If your lender increases prime, borrowing against that line generally becomes more expensive.
It's worth including this in your budget review, even if your mortgage itself is fixed.
If you're buying or renewing soon
Start with the payment you're comfortable carrying each month. Then compare the options that fit your situation.
Already pre-qualified? Check whether anything has changed with your payment estimate, qualification or rate hold before moving ahead.
Want to run some numbers on your own first? My Mortgage Planner App has mortgage calculators, scenarios, rates and much more.
My advice: take a breath and review your own numbers
One announcement doesn't automatically mean you should lock in or change your mortgage.
After more than 20 years helping clients with their mortgages, I know the right decision depends on your budget, comfort level and future plans.
If you're wondering what this rate increase means for you, please reach out. We can review your mortgage together and talk through your options.
Shawn Mooney | Mortgage Architects
Helping clients across Airdrie, Calgary and Alberta. Call or text 403-828-1838.
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