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Bank of Canada raises overnight rate another 50 basis points

The Bank of Canada raised the overnight rate another 50 basis points today to curb record levels of inflation and help continue to cool housing prices across the country. The Bank and industry analysts are signaling rate increases will continue through to next year.

“Canadian homeowners and hopeful buyers are readjusting their monthly budgets and affordability expectations after each of these increases,” says Leah Zlatkin, LowestRates.ca expert and licensed mortgage broker. “While this change may be difficult to manage alongside other increased costs of living right now, it’s important to remember that before the pandemic the overnight rate was at 1.75 percent and we’re not yet back at that level.”

An increase of 50 basis points will prompt an increase of prime rates at Canada’s big banks, from the current 3.2 percent to 3.7 percent. Bank prime rates are tied to variable rate borrowing products, including mortgages and home equity loans. Variable rate mortgages are usually set at prime minus a discount of 0.6 to one percent. Therefore, typical best variable rates will soon be at about 2.7 percent.

How would this change to variable rates affect homeowners across the country?  

• National: According to the Canadian Real Estate Association, the average Canadian home sold at $746,000 in April. With a variable rate of 2.2 percent, monthly mortgage payments on this home would be approximately $2,825. At 2.7 percent, monthly mortgage payments become approximately $2,985, an increase of $160 per month.

• Toronto: According to the Toronto Regional Real Estate Board, the average home in the G.T.A. in April sold at just over $1,250,000. With a variable rate of 2.2 percent, monthly mortgage payments on this home would be approximately $4,330. At 2.7 per cent, monthly mortgage payments become approximately $4,580, an increase of $250 per month.
• Vancouver: According to the Real Estate Board of Greater Vancouver, the benchmark home price in Metro Vancouver reached $1,374,500. With a variable rate of 2.2 percent, monthly mortgage payments on this home would be approximately $4,765. At 2.7 percent, monthly mortgage payments become approximately $5,036, an increase of $273 per month.
• Calgary: According to the Calgary Real Estate Board, the benchmark home price in the city reached $526,700 in April. With a variable rate of 2.2 percent, monthly mortgage payments on this home would be approximately $1,995. At 2.7 percent, monthly mortgage payments become approximately $2,108, an increase of $115 per month.
• Edmonton: According to the Realtors Association of Edmonton (Edmonton Real Estate Board), the benchmark home price in Edmonton was $376,600 in April. With a variable rate of 2.2 percent, monthly mortgage payments on this home would be approximately $1,425. At 2.7 percent, monthly mortgage payments become approximately $1,510, an increase of $85 per month.
• Halifax: According to the Nova Scotia Association of Realtors, the average home price in Halifax-Dartmouth was just over $603,000 in April. With a variable rate of 2.2 percent, monthly mortgage payments on this home would be approximately $2,280. At 2.7 percent, monthly mortgage payments become approximately $2,415, an increase of $135 per month.  
   
  All calculations assume a 15 per cent down payment under $1 million and the required 20 percent above $1 million and a 25-year amortization period. Calculations are according to LowestRates.ca mortgage payment calculator: https://www.lowestrates.ca/mortgage/payment-calculator