One of our Mortgage Brokers, Tom Prasol of 4Front Mortgages, gave us an update on the Mortgage World after another interest rate increase was announced today.
The Bank of Canada has raised interest rates for the second time in less than two months. The central bank’s benchmark rate was raised twice by 0.25% since July and now stands at 1.00%. For consumers, this means the Prime Rate now stands at 3.20%. It was as low as 2.70% just a few months ago.
The rate increase works out to an extra $13 per $100,000 borrowed per month.
Not only does this make mortgages a little more expensive than they were, but many Buyers may now be faced with a little more pressure to purchase a home if they have a rate locked in for the next few months.
There has also been a recent proposal suggesting Buyers with 20% down or more will have to pass the “stress test” and qualify at the benchmark rate, which is typical much higher than the rate they’ll end up paying on a monthly basis. This is to ensure Buyers can afford another interest rate hike. This policy is already in place for Buyers with less than 20% down, and can lead to 20% less affordability for Buyers.
Given this changing environment, it’s more important now than ever to chat with a qualified mortgage broker, and Tom is a fantastic choice. He’s on top of new policies, creative and very helpful. If you’re interested in chatting with him, send him an email to get started: [email protected].