A Strengthening Canadian Economy = Another BoC Benchmark Rate Increase of .25%

News for you...

Just 8 weeks after the last national rate increase comes another .25% benchmark rate increase by the Bank of Canada. This is due to the increasing strength of the Canadian economy and this is good news for everyone for a number of reasons but, it also means interest rates for borrows will be increasing again. As I noted 2 months ago regarding the last rate increase in July, you can expect your variable rate mortgage to increase by 1/4 of a percent as well.

At this point or at any point in your mortgage term, you have the option to opt for a fixed interest rate if you no longer wish to continue with a variable rate mortgage. Your fixed rate option will be based on either a new 5 year term or a term that is at least as long as the time remaining on your current agreement (3.5 years left = 4 year term). This will depend on your lender and the interest rates available to 'lock-in' at will depend on what your lender is currently offering for those terms.

If you're concerned about continuing with a variable rate, you should contact your lender right away to confirm what they will offer you to 'lock-in' at. No, it won't be at your current rate but, at a higher fixed rate. That's the catch.

My general advice...

It seems as if the Federal Minister of Finance (Stephen Poloz) is eager to boost rates as the Canadian economy strengthens and though there has been much doubt around the Bank of Canada increasing rates more than once or twice per year, there is talk that there could be a further rate increase within the next 6 - 12 months. This is concerning to me, given that national consumer debts levels in this country are at an all time high and though many Canadians borrow responsibly, well within their limits, many Canadians are maxing themselves out on credit cards, car loans, lines of credit and even their mortgages. We would have to assume Mr. Poloz is taking this into account when the BoC makes any further decisions regarding rate increases.

Chances are, you're still going to be ahead of the game vs. if you chose a fixed interest rate when you signed your current mortgage agreement and a fixed rate option right now will also be higher than what you're currently paying. Depending on your current variable rate option, it may be worth while to consider looking into a fixed rate for your mortgage, if you want to ensure you're staying below any further rate increases.

If you want to look into your fixed rate options or you have further questions, please don't hesitate to contact me. You can also contact your lender directly for a fixed rate quote.

Remember to make calm, cool calculated decisions about your banking. Don't let the media scare you with sometimes ill-informed advice and often inaccurate but, 'eye catching' graphics. Even nationally trusted news sources like The Globe & Mail have been wrong about important details and they seem to be push 'news stories' that invoke link clicks rather than inform the public.