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08 Sep

Borrowing Money Just got Pricier – Big Banks Raise Prime Lending Rates Again

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It didn’t take long for the big banks to jump on Bank of Canada’s bandwagon. The Royal Bank of Canada (RBC), led the charge, announcing that it will raise their prime lending rates 25 basis points to 3.2 percent. Within a half hour, Bank of Montreal, TD Canada Trust, Bank of Nova Scotia and Canadian Imperial Bank of Commerce all followed suit. This falls quickly on the heels of the Bank of Canada’s target policy rate increase from 0.75 per cent to 1.0 percent yesterday.

The obvious impact will be on families with mortgages and other debts, however, Dave McKay, RBC’s chief executive, explained at a financial summit yesterday that it may also have an impact on the economy.

“That’s one of the effects that we don’t talk enough about,” McKay said. “As rates rise, as they did this morning, a greater amount of disposable income is coming out of purchasing power, which wills low down economic growth in other sectors. And that’s not a healthy thing in the long term.”

Households with variable rate-mortgages and lines of credit/home equity loans will feel the hit. If you’re currently paying $600 biweekly on a 25-year variable rate mortgage, you’ll be shelling out $16 more on each payment with this rate increase.

With some economists predicting that the Bank of Canada will increase rates to 1.5 per cent by the end of 2018, contact one of our preferred mortgage specialists to find out know how this would impact your bottom line and what your options are.  With interest rates on the rise and plenty of inventory on the market, it’s a great time to get off the fence and realize your real estate dreams.

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