Last month, Bank of Canada officials warned that the expected round of interest rate hikes could be higher and come sooner than expected, with the US Federal Reserve chairman saying “inflation is too high” and talking about a move. . quickly “to tame it. Clear comments like these from central bankers are unusual. How much can prices go up? CIBC Economics said in a report released this week that the Bank of Canada’s reference rate could rise as much as 2.25 percent to 2.5 percent from just 0.5 percent today. The next rate hike could take place on April 13 – do not be surprised if the hike reaches 0.5 percentage points, double the move in March. All these reasons that people have why interest rates will not rise or can not rise much? It’s time to park them. What we need to focus on now is how much extra weight borrowers should have on mortgages, credit lines and other floating rate debt. With high household debt levels in Canada, there is no doubt that the Bank of Canada needs to be prudent in raising interest rates. The bank must also be careful not to lead the economy into recession with overly aggressive interest rate hikes. However, controlling inflation is non-negotiable for central bankers and inflation is heating up. The last annual increase in the cost of living was 5.7 percent, compared to the Bank of Canada’s target range of 1 percent to 3 percent. An Investor Guide to Regulatory Suppression of Mutual Funds Selling Mutual Funds The gap between residents and non-residents is widening – will a politician take advantage of it? Discussions about higher interest rates are sometimes overlooked by individuals who have withdrawn their home equity credit limits. Credit monitoring company Equifax Canada says the average HELOC balance at the end of last year was $ 52,000 and the average credit line for new HELOCs was $ 189,000. The cost of HELOC borrowing is linked to the lender’s base interest rate, which in turn monitors the overnight interest rate. The Prime is currently 2.70 percent – the prime rate is close to 5 percent if the CIBC’s one-day interest rate forecast is correct. The minimum required monthly payment in a HELOC is usually only the amount of interest. To find out how much your minimum payments will cost you if interest rates increase by different amounts, try a credit line payment computer offered online by your lender or competitor. A bank calculator shows a monthly payment of only $ 138.67 interest on a remaining $ 52,000 at 3.2 percent, which is a primary plus a common mark of 0.5 of the unit. At 5.5 percent, the monthly minimum rises to $ 238.33. It is even more important to model your potentially higher mortgage costs using an electronic calculator. There are dozens of these calculators available – I like the one offered by Ratehub.ca because it allows you to easily compare different monthly costs at different prices and charges. You can extend your amortization on renewal to reduce your payments. In a note to customers this week, BMO Capital Markets announced that “it’s straight up for mortgage rates.” The BMO said that the five-year fixed interest rates have already been pushed to 3.5%, while the floating interest rates should exceed 3% by the middle of the summer. The Ratehub calculator shows that if you have a $ 500,000 home loan balance over 20 years of renewal and amortization, your monthly payments will be $ 2,893 with a fixed interest rate of 3.5 percent, $ 3,021 at 4 percent and $ 3,152 at 4.5 percent $ 3,152 percent. . If you are interested in a more extreme perspective, the monthly payment will be $ 3,286 at 5 percent. The discounted five-year fixed mortgage rates were around 2.6 percent in mid-2017, so be prepared for much higher borrowing costs if you have a five-year mortgage to be renewed this year and continue to enjoy the fixed interest rate option. After April 13, the next 2022 dates when the Bank of Canada has the opportunity to raise interest rates are June 1, July 13, September 7, October 26 and December 7. We have come a long way from the point where these days pass without problems. Debtors, high inflation means that interest rate prospects are flashing red. Are you a young Canadian with money in mind? To prepare for success and avoid costly mistakes, listen to our award-winning podcast Stress Test.
