The next Bank of Canada press release is Wednesday June 1st where they will declare if our benchmark rate will increase or remain the same. Read our in-depth insight on important information you should be aware of ahead of the announcement.
Surging commodity prices – including oil and gas, food crops, and metals – are helping drive Canadian economic growth, but central bank responses to rampant inflation are likely to cool an overheated economy, according to RSM Canada’s most recent quarterly “Real Economy” report.
The Bank of Canada earlier raised its interest rate by half a percent to 1%, and economists at many major Canadian banks expect a further rate hike next month – with a 50 basis-point increase not out of the question.
The central bank is responding to two broad factors with rate hikes. First, the war in Ukraine and Covid lockdowns in China are further pressuring supply chains and driving inflation outlook higher. Second, the Canadian economy is overheated and increased borrowing costs would dampen consumer spending and investment in the housing bubble – tempering inflation while consequently putting the brakes on economic growth.
To see how this could impact your mortgage payments, read our example below.
If you have a $500,000 mortgage and your current variable rate is Prime – 0.90% (2.30%) with a monthly payment of $2,193.06
If the overnight rate were to increase by 0.50%, prime will increase by 0.50% as well. This would increase your rate from 2.30% to 2.80, and your payment (on an adjustable or variable rate mortgage) will rise from approximately $2,193.06 to $2,319.37.
For every 0.25% increase to the prime rate, it will have a $12-$14 increase per $100,000 in mortgage funds.
To help keep you informed on the Bank of Canada announcements and other important economic information, here are some of Valko Financial’s top sources to follow: