On Wednesday, October 24th, 2018 the Bank of Canada increased its Overnight Target Rate by 0.25%. With this increased cost affecting Big Banks, the big banks themselves have decided to in turn raise their prime lending rates by 0.25%.
This means the prime lending rate with most lenders has gone from 3.70% to 3.95% with TD Canada Trust going from 3.85% to 4.10%. With this increase, monthly mortgage payments have likely increased for variable rate clients.
For every $100,000 in mortgage money someone has outstanding, a 0.25% increase to a variable interest rate mortgage is just over a $12.50 increase to the monthly payment on a 25-year amortization. Just over $13 on a 30-year amortization.
If your interest rate is adjustable, your monthly payment is likely not going to change, but the portion of it going to pay off your principal will decrease, and the portion going to the interest will increase. To continue the same amortization schedule, you can call your lender and have them adjust your interest rate properly. For more information on this, please see the article below labelled Adjustable Versus Variable on the right-hand side of this newsletter.
Dr. Sherry Cooper of Dominion Lending Centres has also posted an article to DLC’s Blog where she discusses the reasons behind this increase by the Bank of Canada and what she expects in the future. For more information, please click here to read her thoughts.
The Bank of Canada will also meet 8 times throughout 2019 where they will discuss whether they want to increase or decrease their target overnight rate any further, these are the following 2019 dates:
Wednesday, January 9*
Wednesday, March 6
Wednesday, April 24*
Wednesday, May 29
Wednesday, July 10*
Wednesday, September 4
Wednesday, October 30*
Wednesday, December 4
If you would like to be notified of any changes along with our current variable clients, please click the following link to e-mail us about your interest.