Almost everyone expects a 50 basis point increase from the Bank of Canada tomorrow. All six major Canadian banks have forecast oversupply, with the market finally pricing at 75%. The last time the central bank raised interest rates by half was 22 years ago. What would this mean for your mortgage? People in the industry say that new mortgage rates are already rising as bond yields rise to the central bank’s expected increases. LowestRates.ca expert Leah Zlatkin said that fixed interest rates in Canada’s major banks are now between 3.5% and 4%. Lenders also reduce the variable rate discount from the original. This marks a “real turning point” because the announced interest rates are now high enough that home buyers and homeowners who want to renew their mortgage with another lender will have to qualify for rates above the current stress test. which is 5.25% or 2% above the offered interest rate, whichever is higher. Mortgage rates were so low that 5.25% was the highest of the two in most cases since June 2021. But not anymore. “Many home buyers are not aware of this shade and it would affect their affordable price even if house prices slowed… next year. For those who refinance, a calculation above 5.25% may mean that they will have to stay with their current lender because they can not afford to undergo a stress test with a higher interest rate. “This eliminates the opportunity to shop for better mortgage rates,” Zlatkin said. A higher interest rate simulation rate will affect mortgage rates starting at 3.26%, he said. Although each case is different, he estimates that for every 0.25% increase over 5.25%, buyers can expect about $ 12,000 less in financing. Thus, someone with a household income of $ 100,000 with a mortgage rate of 3.25% would have an interest rate of 5.25% and could get a mortgage of about $ 528,000. But if your mortgage rate is 4% the eligible interest rate will be 6%, and you will only qualify for a $ 487,000 mortgage. If your mortgage rate was 4.25%, your stress test rate would be 6.25% and your purchasing power would shrink to $ 475,000. But what if you already have a home equity loan? “Anyone who has a floating rate mortgage should know what their payment will be with an increase of 50 basis points next week and will have to budget for additional rate increases of a total of 1-2 percent for the rest of the year,” he said. James Laird. , co-founder of Ratehub.ca and president of CanWise Financial Mortgage Brokerage. If a homeowner pays a 10% down payment on a $ 800,000 home (the average home price in Canada in February was $ 816,439) with a variable interest rate of 1.15% for 5 years amortized over 25 years, the monthly mortgage payment will be 2,847 $. If the Bank raises the overnight interest rate by 50 bps tomorrow, this variable interest rate rises to 1.65% and the monthly payment to $ 3,019, according to the Ratehub.ca calculator. That’s $ 172 more per month or $ 2,064 more per year in mortgage payments. If the central bank raises another 50 basis points at its meeting in June, as some expect, this would raise the overall interest rate hike this year to 125 basis points. The above homeowner will now have a mortgage rate of 2.15% and monthly payments of $ 3,197. “If the gap between floating-rate and fixed-rate mortgages shrinks, the attractiveness of variable interest rates may, for some, also shrink,” said Sung Lee, a RATESDOTCA specialist and mortgage agent. “While there may still be several months in which a variable interest rate could be beneficial, these days may be limited.” Lee said another option that many home buyers are unaware of is the hybrid mortgage. These allow borrowers to split their mortgage between fixed and variable items with the most common being 50-50.
