The latest Bank of Canada rate hike will hit some Canadians when it comes to paying their mortgage.
The central bank increased its policy rate by 75-basis points Wednesday to 3.25 per cent. It’s the fifth consecutive hike by the Bank of Canada since March.
According to Rob McLister, a mortgage strategist with MortgageLogic.news, Wednesday's hike will typically increase monthly mortgage payments by around $42 per $100,000 borrowed on new variable or adjustable rate mortgages with a 25-year amortization.
Most individuals with a variable rate mortgage will not experience their payments increase immediately, McLister said in a phone interview Wednesday.
However, payments may rise for those who have an exceptionally low variable rate, around 1.35 per cent, before the central bank began hiking rates due to the trigger rate, he said.
“Because [the] prime rate has gone up so much, in some cases, people may not be paying all of their interest due. And so for a small percentage of borrowers, they may have to increase the payments…to cover that extra interest due, and that's called a trigger rate adjusted payment,” said McLister.
Those who have an adjustable mortgage, with payments floating alongside prime rates, will be immediately impacted, McLister said.
“Looking back to March 1, when this rate hike cycle began. If you compare a typical prime minus one per cent adjustable rate mortgage between now and then, you're talking about $154 per month [in] additional payment that you’re paying today, and that’s per $100,000 borrowed,” McLister said.
The rate hike will not impact mortgage owners with a fixed rate, he said.
Those with a home equity line of credit (HELOC) may see their payments increase by approximately $63 per month per $100,000 borrowed, said McLister, adding that it is an interest-only payment.