The Bank of Canada’s surprise decision to raise interest rates will bring about higher mortgage costs, according to experts.
by 25 basis points to 4.75 per cent. The move went against expectations and was only anticipated by about one in five economists in a Bloomberg Survey. However, according to Bloomberg News, policymakers indicated that further rate hikes may be warranted after electing to hold rates in January.
A trigger rate is hit when a homeowner’s mortgage payment is not sufficient to cover accumulated interest since their last payment. Leah Zlatkin, a mortgage broker and expert with LowestRates.ca, said in an interview with BNNBloomgerg.ca Wednesday, the recent policy announcement will likely drive fixed rates higher due to the “effect on the Canada five-year government bond,” she said.
According to calculations from Ratehub.ca, a homeowner who put a 10 per cent down payment on $716,083 home, with a five-year variable rate mortgage of 5.55 per cent amortized over 25 years, would have a monthly payment of $4,075. “In general, I'm proposing two and three-year fixed products for everyone, you got to ride out the storm. Unfortunately, we thought we saw some sunny skies and now it's clouding over again,” she said.
“And so now all of a sudden, there could be a huge supply and not enough demand. And that can really put the housing market into a rocky situation,” Zlatkin said, adding that the effect is not yet clear.“This rate hike will put downward pressure on home prices, which have rebounded faster than the bank had expected,” he said.
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