The Bank of Canada decided to increase the overnight lending rate to 1.75% on October 24th 2018. This is the interest rate that the Bank of Canada charges the Chartered Banks to borrow money, which they need to do frequently in order to balance their books at the end of each day. The costs of this rate increase are inevitably passed on to consumers as a higher Prime Rate. Anyone who has a Variable Rate Mortgage or Line of Credit will see an immediate 0.15% increase in their rate.
The Prime Rate was previously 3.7% at most lenders and has now increased to 3.95%. This increase is a predictable action of the Bank of Canada which must keep interest rates heading higher to deter inflation as well as keep the Canadian Dollar stable in relation to the booming US economy.
Anyone who is concerned about these interest moves may want to consider moving to Fixed Rate or possibly transferring into a New Variable Rate with a larger discount. There are significant savings for those who decided to take a Variable Rate Mortgage in 2016, see this related Blog Post for more information.
As usual, you may contact me with any questions about this or other developments in the money and housing market.
