Bank of Canada Raises Key Interest Rate Today
The Bank of Canada raised its key interest rate by a quarter point today, and most lending institutions are expected to respond by increasing their prime lending rates by a quarter point. This marks the first rate increase by the Bank since 2007.
In its statement the Bank noted that “the economy grew by a robust 6.1 per cent in the first quarter, led by housing and consumer spending. Employment growth has resumed. Going forward, household spending is expected to decelerate to a pace more consistent with income growth. The anticipated pickup in business investment will be important for a more balanced recovery.”
In the long-term, variable-rate mortgages can be a more cost-effective option, but a number of factors must be considered in your decision. The biggest reasons for going with a fixed rate are tight budgets and restless nights.
Followings tips to help borrowers cope with rising interest rates:
Guard against payment shock. If you receive extra cash like an inheritance, tax refund or a work bonus, think about it putting towards your mortgage. Or, you can add on to your ongoing mortgage payment each month to help pay down the principal faster. These approaches help create a cushion against a potential payment shock if rates are up significantly at renewal.
Get a mortgage checkup. On top of a possible mortgage rate change, other major life changes may call for looking over your mortgage, such as starting or growing a family, change in income or home renovations. At the Invis-The Kahkesh Group we can review your current interest rate, payments, and other mortgage terms, determine available home equity, and recommend options that may help you better reach your goals.
Consider debt consolidation. Transferring high-cost consumer debt like a credit card balance to a lower interest rate by consolidating it into your mortgage can help you boost your cash flow to build up savings or pay down your debt faster.
Fixed-rate mortgages are not affected directly by today’s announcement as their rates are influenced more by movements in the bond market.