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The Bank Of Canada is expected to raise Interest Rates tomorrow (June 1, 2022). Don’t Panic!

BRACE! BRACE! BRACE! – The Bank Of Canada is expected to raise interest rates tomorrow (June 1, 2022). Don’t panic.
The expected rate increase is to be 0.5%. The Big Banks will respond by increasing their Prime Lending Rate. The increase in Prime will affect current mortgage clients that have a variable rate.
Depending upon the variable product the client has an increase in Prime rate will increase their mortgage payment. This is called an adjustable-rate mortgage (ARM)
Example of Adjustable-Rate Mortgage
Prime: 3.20%
$350,000 Mortgage
25 Year amortization
Current Rate: 2.30% (Prime minus .90%)
Current Payment: $1533.24/month
Prime increases to 3.70%. The payment of your ARM – Adjustable Rate Mortgage payment will increase by $87/month to $1620.65. This works out two about a $0.25/$1000.
The other kind of variable rate mortgage is a static payment variable. With this type of mortgage product, there isn’t any change to your payment, but there are changes to your principal and interest payment.
Example of Static Payment Variable
Prime: 3.20%
$350,000 Mortgage
25 Year amortization
Current Rate: 2.30% (Prime minus .90%)
Current Payment: $1533.24/month
Principal Payment: $866.00
Interest Payment : $668.00
Prime increases to 3.70% The payment of your static payment variable will stay the same at $1533.24 per month. However, your interest cost will increase by approximately $144/month. This means the clients will be paying less principal and increase their amortization period.
You will have questions. We have answers. We have strategies to help you! Whether you want to refinance, pay off debt, access equity for another purchase if the market dips, or just understand your situation more, we would love to help! Contact Us Today! 
This article is written by Peter Paley, the owner at Mainstream Mortgages.

Published June 23, 2022