VARIABLE RATES

We receive a lot of questions about how variable interest rates work, what impacts them, and where they make sense.

Below we have a breakdown of what you need to know, the current market outlook, and what to expect going forward!

    The Bank of Canada holds key rate at 4.25%

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    The Bank of Canada carries out monetary policy by influencing short-term interest rates.

    It does this by adjusting the target for the overnight rate on eight fixed dates each year.


    THE CHART BELOW SHOWS A RECENT HISTORY OF these adjustments ⬇️

    A screenshot of a website showing a graph and a table of recent data.

    The schedule for Bank of Canada Rate Announcements

    A screenshot of a schedule for 2023 and 2024

    All information above was taken from the Bank of Canada website

    Latest Update: September 4, 2024

    • As expected, the Bank of Canada has cut interest rates by .25% for the third consecutive time since June.
    • This brings the overnight rate down to 4.25%.
    • Inflation is sitting at 2.5% which is within the Bank of Canada’s 1% - 3% target range
    • Forecasters expect the overnight rate to fall between 2.25% and 3.25% by the end of next year!
    • Variable Mortgage & HELOC holders will see a decrease in their interest rates. There is no direct impact to Fixed interest rates.
    • On average, Variable mortgage holders can expect a $15 decrease per month for every $100k financed
    • The next Bank of Canada meeting will be held on Wednesday, October 23rd 2024

    Please reach out if you would like a FREE assessment of your mortgage financing.

    ⬇️  LEARN MORE ABOUT INTEREST RATES BELOW ⬇️

    • What Is A Variable Rate?

      A variable-rate mortgage is a mortgage that does not have a static interest rate.


      The interest rate itself can adjust throughout the life of the term. It can adjust up or it can adjust down and this is dependent on a variety of factors, including market conditions, and the Bank of Canada.

    • What Is Prime Rate?

      This is a benchmark interest rate that banks used to determine lines of credit, mortgages, and often personal loans.

    • What Is The Bank of Canada

      The Bank of Canada is the nation's central bank. 


      Its principal role is to promote the economic and financial welfare of Canada.

    • How Often Does The Prime Rate Change?

      Prime rates only adjust when the bank of Canada adjusts its lending rate


      The Bank of Canada meets 8 times per year to make decisions on a wide variety of economic factors and announce a series of updates and changes.


      One of those changes could be an adjustment up or down to the lending rate.


      Historically the government, more frequently, does NOT make a change to the rates when they meet.

    • What Is The History Of The Prime Rate?

      Over the last 10 years, we've seen interest rates stay relatively static. There's been about a 2% deviation from the high end to the low end of interest rates.


      Often we hear people concerned about interest rates skyrocketing. If we look back over a 10-12 year period, there's no such thing as a skyrocketing interest rate other than an increase or decrease of 1-2%.

    • Should I Be Worried If Prime Rate Goes Up?

      If we see an interest rate increase or decrease, it's usually 0.25%.


      If you have a mortgage right now, for every $100,000 that you owe it would be approximately a change of about $12 to your mortgage if rates were to go up or down by 0.25%.


      If you're borrowing $500,000, and the bank was to decrease your rate by 0.25%, that would mean your payment will go down by $60. That's a $6 difference in your payment.


    Questions to ask about whether to stay with a Variable


    1) Would you be likely to refinance in the term?


    If so, stay variable. You may refinance to take advantage of lower rates, qualify for buying another property, consolidate debt such as credit.


    2) Would you possibly sell in the term?


    If so, stay variable. An average penalty on a 5 year fixed penalty is 4%-6% of the balance of loan vs. 3 months of interest.


    3) Would you be worried about a $12 per $100,000 of mortgage increase to payments for every .25% Bank of Canada move?


    If not, stay variable.


    4) Are you comfortable paying 1-1.50% more in interest to have a fixed payment?


    If so, maybe consider a static payment variable first! Then consider the fixed rate if this is not an option.

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