The hike in the bank rate Wednesday by a quarter of one percent will have more impact than just raising Canadian bank’s prime rate from 3.2 per cent to 3.45 per cent.
It will also immediately impact those homeowners with variable rate mortgages or lines of credit who will see their rates go up by a similar amount.
Doesn’t sound like much? Well, on a $400,000 mortgage, the quarter-point rate increase will add about $52 in additional monthly payments, and coupled with two prior interest-rate increases in July and September, borrowers are facing $156 in higher monthly mortgage payments.
In addition, with Canadians holding a record amount of debt and some just squeezing by, the extra payment could negatively impact other household expenditures.
With the new means test for mortgage applicants along with the rate hike, it could mean coming up with an extra twenty per cent down payment to qualify for a conventional bank mortgage.