On Wednesday, the Bank of Canada announced it was hiking its interest rate to 1.25 per cent, up fron one per cent. This is the third increase since last summer, and the central bank noted some key factors in determining this.
While the central bank signalled more rate increases are likely over time, it highlighted the growing, negative impacts related to the unknown outcome of the renegotiation of the North American Free Trade Agreement. Moving forward, the bank said “some continued monetary policy accommodation will likely be needed” to keep the economy operating close to its full potential. The bank said it would also remain cautious when considering future hikes by assessing incoming data such as the economy’s sensitivity to the higher borrowing rates. [CTV News]
The Bank of Canada sets its key interest rate eight times a year, which is used by banks to set their prime rates. The prime rate establishes how much it costs for you to borrow money on any type of loan (mortgage, car etc.).
In the wake of this announcement, five big banks have raised their mortgage rates in the last 24 hours, as is expected. RBC, CIBC, BMO, Scotiabank and TD all raised their prime rate by a quarter of a percentage point.
This will have an effect on borrowers with variable rate mortgages. However, if you want to know exactly what this rate hike means for you, please contact me, I’m happy to answer any questions surrounding this announcement.
