by 25 basis points to 5.00 per cent. The move followed another previous 25 basis point increase in June and brings interest rates to the highest level in 22 years.
However, despite avoiding immediate monthly payment increases, fixed-rate mortgage owners will be impacted at renewal. The cumulative impact of 10 interest rate hikes since 2022 has been “fairly dramatic” for variable-rate mortgage owners, Zlatkin said. There are two types of variable-rate mortgage products, she said, one with variable payments and the other with static payments.
Following the central bank’s most recent interest rate hike, that same mortgage owner would pay $100 more each month, or $1,200 annually, according to Ratehub.ca. Variable-rate mortgage owners whose amortizations are being extended “are not feeling the pain today,” Zlatkin said unless they hit their trigger rate. The “real shock” for those homeowners could come at renewal, she said.
She said that at renewal people who had longer amortizations may have accrued more interest, as they weren’t paying down the principal of their loan, or they may have to make a “balloon payment.”