Today, the bank of Canada (BoC) hold a meeting to discuss the interest rates in the country. The decision was to maintain the interest rate at their current level. They also decided to stop what they call emergency measures. This means that they will stop telling us when they expect to adjust the interest rates and that they will now only replace maturing government bonds. They also explicitly said that they will raise rates this year. The reason that they did not raise interest rate today is because of the unknown economic effect of Omicron. Omicron seems to be milder than previous variant, but its lasting effects on the economy have not trickled in the data yet. They also start thinking that the economy in general has recovered, but has not overheated yet. They also expect inflation to reduce rapidly in the second half of the year due to a shifting pattern from household from buying goods to consuming services.
So, it is possible that at the next meeting in March 2nd there will be a rate hike. Rate hike by the BoC are almost always of 0.25 % at the time. They generally wait at least 6 months to make a second change. However, there is a few instance that the BoC raised rates faster, but that was always followed by a reduction a few months later.
Now what should you do? If you have a fixed rate mortgage, there is nothing to do for you until renewal. If you have a variable rate mortgage but with a payment that remains constant (your mortgage is most likely with TD) you have also nothing to do. Your payment will not change with the increase in interest rate. If you have a variable rate with any other bank, nothing changes today, but we can prepare for the future. A raise of 0.25% will increase your payment by about $12 by $100,000 of mortgage. So, if you have a $500,000 mortgage, your payment will change by about $60 per month. For all my customers on a variable rate, the rate you currently have was over 1% lower than the fixed rate at the time. Even if the rates goes up you will still be making significant savings on your mortgage. If you start loosing sleep over this email, please contact me so that we can discuss converting your variable rate to a fixed rate.
If you don’t have a mortgage yet and that you are thinking of buying this year. I suggest that you contact me sooner rather than later so, that we may start the pre-approbation process and get you a rate hold at today’s prices.
If you have any questions do not hesitate to contact me at 604-828-9864 or by email at simon@refinancebc.ca.
Simon Bilodeau
Mortgage Broker
DLC - Mortgage Negotiators
604-828-9864