What the Bank of Canada Overnight Rate Hike Means For You, Part 2

Hi everyone! Senior Mortgage Broker Michele Ellis here, as always, to bring you the latest mortgage news across Canada. The most recent development might sound a little familiar: On Sep6, the Bank of Canada “raised its target for the overnight rate to 1 per cent.” To recap, that’s up a quarter point from 0.75%, which is what the Bank of Canada set as the overnight rate less than 2 months ago (for the 7 preceding years it had been another quarter point below that, at 0.50%). To wit: the overnight rate is now double what it was at the start of July.

So what does that mean for your mortgage?

That’s a complicated question, the answer to which depends almost entirely on your personal situation and home-owning goals. In my post about the last overnight rate hike, I pointed out the immediate general effects of such a raise: if you have a variable mortgage or line of credit, you’ll see a slight raise in rates, and if you have a fixed-rate mortgage, you have nothing to worry about – for now. The general value of interest rates is of course trending up, but this is a purposeful move on the part of the Bank of Canada in response to “recent economic data [that’s] been stronger than expected”. In other words, interest rates are rising only because the Canadian economy is on a strong upswing of its own. This economic strength accounts for the suddenness of this second rate hike so soon on the heels of the first one – if you’ll recall, the subject of another raise wasn’t supposed to come up until the BoC’s October meeting. Yet here we are.

The rapid pace of our changing economy, even if those changes are for the better, makes it all the more important to understand how your mortgage will be changing too (or how a mortgage might look for you in the future). If you have a variable mortgage, are you in a position to handle rising rates? Would it be a good idea to convert to a fixed-rate mortgage for pure peace of mind, even if your initial interest rate might be higher? Conversely, if you have a fixed-rate mortgage now, is it possibly worth breaking to get a better variable rate?

You can see how these questions – and many others like them – can only be answered in the context of your unique personal situation. I know it’s a complicated landscape to traverse, and that’s why my best advice is to consult with a professional in the mortgage or finance industries. As it so happens, I have over 20 years’ experience in these fields, and plenty of that experience comes from helping people just like you figure out how to best plan for their financial future. Ultimately, only you can know which mortgage is the right fit for your personal and professional realities and goals – but I can show you all your options, walk you through the pros and cons of each, and help you narrow down your choices until you’re 100% satisfied you’re making the right one. In fact, that’s the definition of what I do as a professional mortgage broker – I use my thorough understanding of the market to guide you to your perfect mortgage. Unlike the overnight rate, my commitment to that goal never changes (though changing rates are a good example of why my help is useful)!

As always, my number is 604.892.4647, and I keep my phone on all day. If you think my experience in the Canadian mortgage industry could be at all of service to you, I urge you to give me a call. And if that doesn’t convince you – have I mentioned my services are completely free?

Michele Ellis – Senior Mortgage Broker, The Mortgage Studio