Tuesday, April 17, 2012

Interest Rate Hikes Coming?

May Start Raising Interest Rates

An article in the Financial Post says the Bank of Canada may need to start raising rates due to stronger than expected growth and inflation as well as a less hostile global backdrop. The have not increased their key lending rate which remains at 1% as of today.

What Interest Rate Increases Mean For An Average Mortgage

The following example is based on a $200,000 mortgage, with 25 year amortization and a fixed interest rate for 5 years. Allowing only for principle and interest payments (no taxes or utilities) at a 5% rate the month payment would be $1,163.21, an increase of .5% to 5.5% would increase the payment to $1,220.79 and a 1% increase to 6% would increase the payment to $1,279.62.

To sum up based on a $200,000 mortgage every .5% increase in interest rates would require another $57.58 per month to service that debt.


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