As expected, the Bank of Canada increased Prime lending rate by 0.50% today. Based on the Bank of Canada media release (you can read it HERE) we will most likely see further tightening this year.
What does this mean to you if you are in a variable rate mortgage? Your payment will be going up, however since you have budgeted for a higher payment it just means that less is going into your savings. You’ve set yourself up for success as I had suggested.
Fixed rates are sitting around 4.20% for a 5 year fixed rate term today if you want to lock in, which I wouldn’t suggest.
If you look at the economic cycle, historically when we see periods of high inflation they are usually followed by a recession. My hope is that it is a soft landing as opposed to a crash. However when the economy turns usually that means rates go down!
Depending on which media source you are reading they make it seem like the sky is falling and the world is ending. They are very good at creating panic.
This is not the reality at all. We saw rock bottom prices and got used to them during the pandemic and now we are seeing things come up to pre-pandemic levels. The rate increase today brought prime rate almost back to where it was before the pandemic. This is not the 80’s. Can you imagine what would happen to the economy if rates went there? I don’t see that happening at all.
So in summary, there is no need to panic, however whether you take a fixed rate or a variable rate mortgage it is important to budget based on the higher rate.
Reach out any time if you have any questions. I am doing my best to respond to your inquiry within 24 hours.
Renee