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Hello Shawn
As expected the Bank of Canada
increased their overnight lending rate by 0.25%, raising the Prime Lending
Rate for most if not all of the lenders to 2.70%. Here are a couple of things
that you need to know.
- Prime Rate Change: Most if not all
of the lenders changed their prime lending rate from 2.45% to 2.70%. This
change is effective March 03, 2022 for most lenders. This means if you
have a Variable Rate, your payments will change for your next payment,
that or the amount paid to interest will be modified. This depends on
the type of Variable rate you have.
- Who does this affect: This change will
affect every borrower with a variable rate mortgage or those wishing to
obtain a new Variable Rate mortgage. This change will not change the
spread on the variable rate (example Prime Minus 1.0%). The Variable
Rate change does not affect Fixed rates.
- When will the Payment Amount Adjust: For most lenders
the payment will adjust on the 2nd regularly scheduled payment following
the rate change date. For monthly payments, the April 1st payment in
most cases won’t change, but the payment May 1st will reflect the new
payment amount. For Weekly payments, assuming payments are on Friday, if
you had a payment on Friday March 4th, it would not change, for the
payment on Friday March 11th, the payment would reflect the new amount.
- My opinion on Variable Rates: Although Variable
rates have increased, Variable rate mortgages are still really low. You
could expect a rate of 1.70% on a new Variable Rate mortgage, possibly
lower. This is still quite a bit lower than fixed rates which are
pushing the high 2% to low 3% range. So if you have any tolerance to a
little risk, then these still might be for you. Further, depending on
your circumstances it may be a better option, for example if you were
planning to sell and break the mortgage, you would do much better with a
variable rate as they are cheaper to get out of then fixed rates.
- Save the Date: The Bank of
Canada is scheduled to meet again on Wednesday April 13, 2022.
Please don’t hesitate to contact me
if you would like any additional information or if you are simply in need of
any advice with respect to this or anything mortgage related.
If you think this information could help out a friend or a
family member, I would really appreciate it if you would forward this email
or provide them with my contact information. I will look after them as if
they were a friend or family member to myself.
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