The Bank of Canada made a supersized rate hike announcement on Wednesday, increasing its benchmark rate a full percentage point. The Globe’s Erica Alini hosted a Reddit AMA to answer users’ questions on what the latest hike means for them
In the short term: Rising rates make borrowing more expensive for people who have debt with variable rates such as a variable-rate mortgage or a line of credit. That puts extra stress on family budgets when people are already contending with record-high inflation. In the longer term, the interest rate increases are supposed to bring inflation back down, which would benefit everyone’s budget.
If you want to shop around, you’ll have to break your mortgage and pay a penalty of three months’ worth of interest. You’ll also have to re-qualify for the stress test; at this point you’re looking at having to qualify at around 7 per cent for a five-year fixed. One thing to consider is the possibility of locking in for a shorter term: so a one-, two-, three-year fixed instead of a five-year term. But some lenders won’t let you lock into a fixed for a different term than the one you have.
What will be the first thing sacrificed when families pay 50 per cent of their take home pay toward housing costs?
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