By now you have likely heard that the Bank of Canada has increased the prime rate. This is the 5th increase since last summer. The prime rate has increased from 3.70% to 3.95%. When the prime rate increases I find that many consumers are left a little confused about how this affects them. The prime rate ONLY affects loans that have a variable rate. If your mortgage or vehicle loan has a fixed interest rate, this rate increase will have NO affect on you.
If you have a variable rate mortgage; a line of credit, or a variable rate loan then you will experience a payment increase.
You can currently obtain a 5-year insured variable mortgage for prime -1.00%. The rate has gone up from 2.70% to 2.95% as a result of the Bank of Canada announcement. This means a payment increase of $38.09/month on a $300,000 mortgage or $63.48/month on a $500,000 mortgage.
In historical terms, today’s rate is still very low. Here is something to give you a little perspective!