During this morning's meeting the Bank of Canada announced they will be increasing the overnight rate by an additional .25%. This rate affects most variable-rate lending products, and specifically variable-rate mortgages.

While most economists were in agreement that this rate hike was expected, there is still uncertainty over how many more we can expect in 2019 and onward. The Bank of Canada certainly seems to think that the economy (and the typical Canadian household) can handle these moves, but they will be analyzing the data to see just how far they can do so before stabilizing or potentially even reversing the changes. Historically speaking during any 5 year period the prime rate has gone not just up, but also back down again. I predict that once we weather the anticipated rate increases (gradually, over the next 1-2 years) they'll come back the other way soon enough. 


This is the first thing people wonder in increasing rate situations, and rightfully so. As with most things in life however, now is not the time to panic. Even with this latest increase, most of our clients with variable-rate mortgages are still paying substantially less interest than a comparable fixed rate option. And while your lender will typically offer you the option to lock into a fixed rate now, it may not be the right option.

One of the most important considerations in determining whether to lock in your rate is your personal circumstances. If you're uncomfortable with budgeting for the small fluctuations in your regular payments, then it may be worth considering locking in.

*Point to remember: Although your lender will technically let you "lock in" to a fixed mortgage, it won't be at your current interest rate. It will be at their current fixed rate for either your remaining term or longer. This rate will likely be higher than you are paying on variable, so consider your options carefully.


If there is only one thing you take from this, let it be this: Don't let the media and news get you caught up in the hype and dramatization of today's (and any future) rate increases. Interest rates go up and down according to economic conditions, so although it can be tough to swallow the thought of paying more interest, it generally means that we're heading in a good direction from an economic standpoint.

And remember that a .25% interest rate increase on an average $300,000 mortgage is a $39 per month change in your payment. This is only a 3.5% increase to your regular payment.

If you're concerned about today's rate change don't hesitate to give me a call. We can discuss the impact of the change as well as the option to lock in your rate, if variable no longer makes sense for you situation!