By Nigel Maxwell

Interest rate hike puts pressure on home owners

Jan 18, 2018 | 11:00 AM

Local homeowners could be feeling the pinch following the Bank of Canada’s latest hike.

On Wednesday, the central bank moved interest rates up a quarter point to 1.25 per cent. In response, most of Canada’s big banks are raising their own prime rates by a quarter of a percentage point putting pressure on homeowners with variable rate mortgages.

Prince Albert mortgage broker Debbie Dowhay, with Mortgage FX, told paNOW there will be an impact on monthly payments.

“Anybody who had a variable mortgage, payments will probably change by $20 a month,” she said. 

In defense of their decision, the Bank of Canada has said that inflation was close to target and the economy was operating roughly at capacity. Dowhay said the move to hike the interest rate was not totally unexpected.

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“We’ve been getting spoiled with interest rates being so low, so these are not out of the norm for interest rates. We are getting back to what normally should be,” she said.

As of Oct. 2016, all insured mortgage applications were required to pass a stress test at a higher rate to ensure they could still repay their loans, even if interest rates rose or their financial situation changed.

Dowhay said with the interest rate going up, the rate to qualify for a mortgage will also likely go up in the months to come, impacting what a buyer can purchase.

nigel.maxwell@jpbg.ca

On Twitter: @nigelmaxwell