Bank of Canada Increases Rate

The Bank of Canada Raises Overnight Rate to 1.75%

Will rates continue to rise in 2019?

The answer: be ready! Economists are expecting that rates will continue to rise steadily. A "home" zone that economists call a neutral interest rate is between 2.5 - 3.5%. This is where the "cost of money is neither stimulating expansion or curbing growth" (Carmichael, Financial Post). So, we should be expecting at least 2 more rate hikes in 2019. 

Photo from Carmichael, Financial Post. Source: Bloomberg News

How does this affect you?

If you have a fixed rate mortgage, you don't have to worry too much! Unless of course your mortgage is coming up for maturity. The reason we qualify borrowers at a higher interest rate is to ensure that when rates rise, they have the capacity to take on a higher monthly mortgage payment. 

If you have a variable rate mortgage, well, you may feel the impact as prime rate has increased by 0.25% and is now sitting at 3.95%. If your bank doesn't automatically do this for you... ensure you increase your monthly payments. Otherwise, more of your monthly mortgage payments will go towards interest rather than principal -- in turn it will prolong the life of your mortgage.