How the rise in interest rates could affect your mortgage
People with variable rate mortgages could see an increase of about $83 over last year, says financial adviser
Rising interest rates mean many Islanders will have to change their spending habits, says a Charlottetown-based financial adviser and mortgage broker.
Paul Trainor says on a $200,000 mortgage, homeowners with a variable interest rate could be paying about $83 a month more than they were at this time last year.
"The rising increase in mortgage rates is going to have a huge impact and people are going to have to change their lifestyle," he said.
The Bank of Canada raised its benchmark interest rate Wednesday by a quarter point for the fifth time since last summer, pushing up the cost of borrowing for Canadians.
Highest since 2008
The bank's rate is now set at 1.75 per cent. That's the highest it's been in almost a decade, dating back to December 2008.
Trainor said more rate increases are expected. He said people with variable rate mortgages or a working line of credit will feel the hit first.
On a $200,000 mortgage, for example, he said a homeowner was paying roughly $926 last year when the median interest rate was 2.8 per cent. With the new rate of 3.6 per cent, that same mortgage will cost $1,009 per month.
Those Islanders will have to find other ways to make up the increase in their mortgage.
'Have to restructure'
"It's not like you can cut back on it, you have to pay it," he said. "People are going to have to restructure."
People who have fixed mortgages will feel the increase when those loans are up for renewal, Trainor said.
"Those type of people can at least structure it so they can brace for it down the road."
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With files from CBC News: Compass