The Bank of Canada (BoC) has raised its interest rate by 0.25% this morning. This is the first increase in more than seven years. Canadians have lived in a historically low-interest environment since the Global Financial Crisis of 2008. Back then the Bank of Canada overnight rate fell from 4.50% to an all-time low of 0.25%.
Homeowners with variable/adjustable rate mortgages will likely see their rate and possibly payments increase. Home Equity Lines of Credit and Personal Lines of Credit will also be affected.
Based on recent public statements made by the Bank of Canada, some economists are predicting that this may be the beginning of a string of rate increases because of strong economic data and solid employment numbers. However, inflation is running well below the Bank of Canada’s target at 1.3%
But GDP is rising and the Bank’s Governors seem to feel it will continue to do so, despite weak oil prices and trade uncertainties with the U.S. That said, economists are mixed on the timing of the next rate increase, so we will continue to watch for indications from the BoC.
Now we will wait and see how much of a Prime rate increase the banks pass on to consumers. Currently most lenders have a Prime rate of 2.70% with TD at 2.85%.