Will another interest rate "bankrupt" Canadians?
Experts predict an increase in prices. How many dollars will housing rise in price?
On Jan. 6, the Bank of Canada approved an interest rate but promised it would be the last in the cycle. The previous increase was in December 2022.
The rate increased from 4.25% to 4.5% (by 25 basis points). At the moment this is the highest rate in the last 15 years. The Bank of Canada has made this decision 8 times in 9 months, and the rate has increased by 400 basis points over the year.
The increase is due to attempts to reduce inflation and control the cost of housing. According to the Bank, they expect to maintain the rate at current levels but stressed that the same scenario is possible in the future. The goal is to bring inflation down to 2% and stabilize prices.
The jump is bound to affect homeowners and potential buyers. All mortgages are tied to the prime rate. Even the lowest ones will rise. Experts say the minimum rate will be 5.7%.
So for every $100,000 CAD in a floating-rate mortgage, you will have to pay an additional $20 CAD each month. In total, roughly homeowners in Vancouver and Toronto who purchased a home in 2022 will increase their home payments by $127-129 CAD each month. Other cities will see smaller additional payments: in Halifax, $46 CAD; in Edmonds, $47 CAD; and in Calgary, $66 CAD. The Canadian average is about $80 CAD.
The rise in rates over the past year certainly makes life more difficult for those with mortgage loans. But it may serve to handle finances more carefully.
