This is taken from Krista Klein‘s newletter, a fantastic mortgage broker you should contact for all financing needs!
How much did the Bank of Canada raise its overnight lending rate?
.5%. The prime rate has now gone from 2.7% to 3.2%. Still below historical norms.
What happens if you have a prime – 1% mortgage?
Your rate goes from 1.7% to 2.2%. Still below historical norms.
What happens to your monthly payment?
For the 0.5% increase, you can expect a $25/month payment increase for every $100,000. If you have a $500,000 mortgage, that will be a $125/month increase,
While it is noticeable, your payment is still lower than switching into a fixed rate today.
Where are fixed rates at?
4% ish – The bond market determines fixed rates and not the Bank of Canada.
Should I get fixed or variable?
Personally, I would not pay a 2% premium for a fixed-rate mortgage. I’d stick with variable. The difference in payment for fixed vs variable is in the range of $90/month per $100,000.
Historically, you pay less interest with a variable rate mortgage over the term of your mortgage, and over the 10, 15, and 20-year timelines.
What should you do in this increasing rate environment?
Structure a line of credit against your properties to allow for flexibility and liquidity if ever needed.
When should you structure a line of credit?
Now, we are at peak values of real estate and it’s best to lock in the line of credit amount based on a peak value appraisal