The Bank of Canada is gearing up to announce its next move on interest rates this Wednesday, with Bay Street forecasters expecting a 50 basis-point increase to put Canadians with variable rate mortgages on edge and keep some prospective homebuyers on the sidelines.
With variable rate mortgages pegged to the Bank of Canada's decision, "interest rate hikes will begin to bite soon," BMO Capital Markets' senior economist, Robert Kavcic, said in an interview.
"On a home priced at $800,000 with a 15 per cent down payment amortized over 25 years with that variable rate in place, it's an increase of about $85 per month," she said in an interview. Another half-point increase would add around $170 a month on top of that. Although taming inflation is one of the Bank of Canada's primary goals, higher interest rates could have a bit of a cooling effect on Canada's hot housing market overall, something BMO's Kavcic says he's already starting to see.
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