Well, we knew it had to happen eventually. For the first time in seven years, The Bank of Canada raised its key interest rate. The rise to 0.75 per cent prompted all five major Canadian banks to increase their prime rates to 2.95 per cent from 2.7 per cent. This quarter point will have an effect on variable rate mortgages and lines of credit, of course, but historically, this is a minor blip for most Canadians.
Those who have been in the homeownership market for decades remember all too well the double-digit mortgage interest rates of the 1980s, which peaked at just over 21 per cent. A quarter point over today’s historically low rate seems little enough to pay when you consider the value of an investment in housing.
Contrary to those who suggest this rise in rates will slow down the home-buying market, it may in fact spur fence-sitters to purchase now, before rates go up again. Remember, real estate is a cyclical business. In the long run, those who ride out the fluctuations are glad they did.