Mortgage Blog
Making Sure your Mortgage Fits
THE OVERNIGHT RATE HAS INCREASED THIS MORNING
June 1, 2022 | Posted by: Simon Lyn
This morning at 10am the Bank of Canada (BoC) increased it's overnight lending rate by 0.5%, which was well anticipated. Here is what this means for your variable rate mortgage and/or home equity line of credit: Home Equity Line of Credit (HELOC): The Prime rate is expected to increase by 0.5% which will increase the banks' Prime rate to 3.70%. Your interest rate will therefore increase by 0.5% meaning you will be paying slightly higher interest on your HELOC balance and your minimum interest only payment will also increase accordingly.
For every $100,000 balance on a HELOC you will be paying approximately an additional $42/month in interest.
Adjustable Rate Mortgage:The interest rate on your variable rate mortgage will also increase by 0.5% as the banks increase their Prime rate by 0.5%. Your rate is calculated based on a discount OFF Prime rate and while your discount remains locked in, the Prime rate will increase accordingly.
As a result of the interest rate changes, your payments will adjust with the rate change.
For every $100,000, a 0.5% rate increase equates to roughly a $27/month increase. For example, on a $500,000 mortgage your payment will increase by roughly $135/month so please don't panic!
Variable Rate Mortgage: The interest rate on your variable rate mortgage will also increase by 0.5%, however your payment will remain static and not change. ie. TD, BMO, CIBC, RBC or HSBC.
So overall, while the news will spread fear, this increase will not cause any noticeable impact on the market and affordability. However, the change may be seen in buyer mentality but do not expect any significant shift in the marketplace.
