The Bank of Canada raised its policy interest rate by 25 basis points to 2.5 per cent. It’s the first hike since July 2023. The central bank wants to control inflation by reducing the risk that high fuel prices could spill over and seep into the overall economy.

OTTAWA — OTTAWA - The Bank of Canada raised its policy interest rate by 25 basis points to 2.5 per cent. It’s the first hike since July 2023. The central bank wants to control inflation by reducing the risk that high fuel prices could spill over and seep into the overall economy.

  • quanin ( quanin@lemmy.ca ) OP
    1·
    3 days ago

    AFAIK, variable interest rate mortgages only require payment increases if rates rise high enough to no longer cover interest payments.

    You’re close. You’re thinking Fixed-Rate variable. And the flip side of that is if you hit your trigger rate and your payments increase, they won’t decrease again until you renew. So when interest rates go up, you’re watching the BoC to see by how much and then doing the math - either that, or you’re surprised when your mortgage payment increases. But when interest rates go down, you’re basically on a fixed mortgage.

    The other one is Adjustable-Rate variable, and that one follows the interest rate up and down more closely. BoC raises, your payments rise. BoC drops, your payments drop.

    Neither is long-term better than a fixed mortgage, which is why that’s what 60-70% of mortgages in Canada are.