Bank of Canada news not ideal for those with variable mortgages

The news Wednesday from the Bank of Canada isn’t what new home buyers or those with a variable mortgage rate wanted to hear.

According to mortgage broker Carrie Cardinal, the news that the central bank is raising its key interest rate will see variable mortgages increase by $15 per month for every $100,000 of mortgage that is outstanding.

“A lot of people think that the mortgage rate increase on prime will affect everyone and that’s not exactly true. It’s only affecting mortgage rate holders who have a variable rate mortgage,” she explained.

While this is only impacting a select number of people, it’s leading to stress for a lot of people looking to buy a new home.

Cardinal feels the best advice she can give to people looking at purchasing new homes or on variable mortgages is to talk to their broker or lender to figure out what’s next.

“I think the best thing people can do right now is talk to their mortgage broker or lender and really get an understanding if they’re planning on buying this upcoming spring,” she said. “If they’re going into a variable rate, (figure out) what that’s actually going to end up costing them (and) maybe looking at an option of fixed versus variable.

“As you know, those fixed rates are locked in for a period of time and it will not change based on the Bank of Canada changing (its) prime rate.”

Cardinal noted she’s hopeful this will be the last increase we’ll see from the Bank of Canada.

While some might think the home buyers market would be slowing down because of the interest rate, Cardinal says she hasn’t noticed that trend so far in 2023.

“I think the big thing for people is they want to know what it’s going to cost them. My January with mortgage pre-approvals has been busier than any other January in the last couple of years,” she explained.

“What folks are doing is they’re wanting to get pre-approved so they know they can qualify and what the payments are so they can set a budget to buy this spring. Our inventory here is a little bit low, so the demand is still there, but it’s really just knowing what your cost is going to be so you can qualify in that range.”