30 Jun

Subject: Rising rates now – Quick formula for you


Posted by: Mark Alltree

I hope you’re enjoying this fine start to summer with all kinds of wonderful local events planned for this “special” holiday weekend.

Before your weekend starts, I wanted to let you know that fixed mortgage rates are going up and have already gone up as much as 0.25% for some lenders because of rising yields in the bond markets.

Variable rate mortgages may go up too, but we’ll have to wait and see if the Bank of Canada (BOC) raises its bank rate (target for overnight rate) on Wednesday, July 12th.  Some experts think they won’t because of the recently reported lower inflation rate.   That said, the Chartered Banks can still independently increase their prime lending rate without any move in rates from the BOC, which directly affects variable rate mortgages.

How might this relate to you?

You can use the following as a guideline to help you determine a rising payment estimate for your mortgage:

  • For a fixed or variable rate mortgage with a rate increase of 1/4% of 1 percent or 0.25%, your payment on average could increase approximately $6.30 per month for every $50,000 of mortgage balance owing;
  • for example, if you have a $450,000 mortgage balance – $450,000/$50,000 = 9 x $6.30 which equals a monthly payment increase of $56.70 or half that, $28.35 for a bi-weekly payment.

So if your budget can tolerate a rate increase based on the above noted example or even twice this amount, you are in a good affordability zone.  If not, or you want a payment review, click here to send me an email to discuss your options.

Have a great Canada Day long weekend!