Bank of Canada Rate Increase July 2018

Yesterday the Bank of Canada announced that interest rates will go up another quarter percent and its the forth time they had increased it this year with another potential 3 increases for 2018. The dates are in Sept 5, Oct, 24 and December 5. As you can see with every increase they did it was a quarter percent. Here is the interest rate history from the Bank of Canada website. The BOC mentioned that they want to increase the rates up to “NORMAL LEVELS”, so what does that mean? My best guess is that the BOC would eventually increase interest rates up to what it was when we had our two most recent financial downturns in 2001 and 2008. So rates can go up as high as 4.0 % to 5.5 %

So what is a a quarter percent in real dollars? A quarter percent increase on every $100,000 borrowed is $20 extra per month. With a potential 3 extra increases that can be an extra $60 per month. Thats like a gym like a gym membership. Now things are starting to add up especially since most home owners owe more than $100,000. If you are a homeowner and you are on a variable rate mortgage you should begin to think about locking in. If you are a home buyer expect qualifying for a mortgage to be just a bit more difficult again. The Bank of Canada Stress test rate should also go up by another quarter point. So if you make a $100,000 per year you should only qualify for about $390,000 thats about a $10,000 decrease in purchasing power.

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