“The Bank of Canada has raised its benchmark interest rate by the largest amount in more than 20 years…”*
“The bank’s rate impacts the rate that Canadians get from their lenders on things like mortgages and lines of credit. Two of Canada’s big banks have already moved their benchmark rates in response, with Royal Bank and TD raising their prime lending rates from 3.7 per cent to 4.7 per cent as of Thursday morning.”*
This is the top financial news from yesterday, July 13th 2022. How does this interest rate increase affect your mortgage payment?
Anyone with a variable rate loan will definitely see an increase to their monthly payment. This is because the interest rate of a variable rate mortgage is based on the Prime rate of the lending institution. When the Prime rate goes up, the interest rate also increases accordingly. This is different from having a fixed rate mortgage.
The monthly principal and interest payment is also calculated based on the Prime Rate. When the Prime Rate changes, the Principal and Interest payment will be adjusted accordingly. Therefore, if you have a variable rate mortgage or loan, it is important to keep an eye on your payments going forward because your monthly payments will definitely increase once the lender increases its Prime Rate.
Some mortgages allow for the borrower to change their interest rate from a variable rate to a fixed rate. Overall, it is important to understand the terms of your existing mortgage as well as know the options you have under it.
If you have questions regarding your real estate purchase, sale or refinance transactions, contact us at info@ibitoyelaw.com, we’ll be happy to help.
*cbc.ca/news/business
Ibitoye Law Office
Latest posts by Ibitoye Law Office (see all)
- Importance of Having a Will in Ontario - July 28, 2026
