After mortgage rates being at record low levels, The Bank of Canada has been giving hints that those rates could increase in the near future.
These rate increases could begin as soon as July 12, when the Bank of Canada will meet to review its interest rate target.
The rate hike is expected to not be very impactful with an increase of 0.25 of a percentage point. Canadians with a fixed-rate mortgage wouldn’t feel the impact of the raise until their mortgage comes up for renewal, but those with variable-interest mortgages would start paying more interest as soon as the rates rise. However, this possible rate increase won’t affect home buyers that have been pre-approved for a mortgage with a fixed rate.
The Bank of Canada has mentioned on June 12 that the economy was showing signs of “moving past” the oil shock that prompted two interest rate cuts in 2015, rates since then have been held at a 0.5 per cent.
Policymakers have been trying to cool down the housing market by creating tighter federal mortgage regulations to provincial-level taxes on foreign homebuyers in Vancouver and Toronto. The increase of the mortgage rates will cool down the housing market even more. The hike of the interest rates could also mean that home prices could decline.
According to a recent Ipsos poll conducted for RBC mentions that one-third of Canadians say they would worry if their mortgage payments went up by 10 per cent.
Decisions have not yet been set, this is a change that may or may not happen. So keep an eye out on July 12 because that’s when a final decision is said to be made regarding the mortgage interest rates.