The Bank of Canada has raised its interest-setting rate from 0.25 percent to 0.5 percent.

What does this mean to people with mortgages?

A local expert sent out an email blast regarding this matter when the central bank announced the rate hike Wednesday (March 2).

Take note that the increase affects only variable-rate and not fixed-rate mortgages.

The expert explained that the 0.25 percent rate hike means a $13 increase per month in payments for every $100,000 of mortgage.

To illustrate, the broker cited a mortgage amount of $500,000.

At a variable rate of 1.55 percent before the increase, the mortgage payment equals $1,736 per month.

The expert indicated that with a new variable rate of 1.8 percent, the resulting mortgage payment would be $1,796.  It’s an increase of $60.

The Bank of Canada is expected to continue raising rates this year and into 2023.

And so the expert posed the question of whether or not people with variable-rate mortgages should lock in with a fixed rate.

He explained that locking into the current fixed rate of 3.29 percent would mean mortgage payment on $500,000 increases to $2,180, or an additional $444.

They suggest sticking with variable rates.

“While variable rates may increase through 2022, they are still significantly lower than fixed rates,” they wrote.

They also explained that it would take six interest rate hikes on the variable rate to match the current fixed rate of 3.29 percent.

“Most banks will continue to push fixed interest rates because they make more money,” the expert wrote.

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Source:  Georgia Straight