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The average new Vancouver mortgage may cost $780 more per year now

The big banks are raising many of their lending rates, following the Bank of Canada raising its key rate. Aaron McArthur explains what that could mean for borrowers.

Vancouver homeowners may find themselves paying almost $800 more per year to service a mortgage if they obtained one recently.

That’s thanks to the Bank of Canada, which raised its key interest rate from one per cent to 1.25 per cent on Wednesday.

Coverage of interest rates on Globalnews.ca:

The Mortgage Group has estimated that every time the interest rate goes up by a quarter of a percentage, it can add about $13 to your monthly mortgage payments for every $100,000 borrowed.

The average new mortgage balance in Vancouver was $517,000 in the first quarter of 2017, according to TransUnion.

The Mortgage Group calculated that a $500,000 mortgage would cost about $65 more per month now.

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That’s about $780 more per year.

READ MORE: New Vancouver mortgages took a ‘significant’ hit after foreign buyers tax, data show

The interest rate hike came at a time when many British Columbians felt they weren’t ready for one, according to a recent survey by MNP Debt.

That survey found that as many as one in three B.C. residents were worried that they could have financial trouble if interest rates went up.

Over a quarter of respondents (26 per cent) said they were worried about an interest rate hike, and that was up four points from September.

And that’s in a province with the highest debt service ratio in Canada.

This chart shows how debt service ratios have trended in the past two decades:

But not everyone will hurt from the interest rate hike, Mortgage Group vice-president Dan Pultr told Global News.

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“We see that people are actually making sound judgment, they are staying within their means,” he said.

“But there are people that may be outside of their means that were in variable rate mortgages.

“It could be a little bit more concerning if all of a sudden their payments start increasing.”

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And the interest rate hike isn’t all bad news.

The rate was hiked because Canada’s economy is doing well, producing lots of jobs and strong business sentiment.

READ MORE: In B.C., 4 in 10 people say they’re $200 away from not being able to pay the bills: survey

But that could change, CIBC economist Avery Shenfeld noted Wednesday.

Respondents to the Bank of Canada’s Business Outlook Survey, which helped to justify the rate hike, said they’re “increasingly concerned” about what will happen with the North American Free Trade Agreement (NAFTA).

“Today’s rate hike was a rear-view mirror move, but the Bank of Canada hints that the view out the front window isn’t quite as sunny,” he wrote.

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