As was widely reported yesterday, the Bank of Canada once again increased the benchmark overnight interest rate. This interest rate is what variable rate mortgages are based off of. It means that variable rate mortgage holders are directly impacted by this change in the short term interest rate.
It is unfortunate that many homeowners who bought a home in the most recent years are now facing increasing financial stress and strain. This is due to the fact that mortgage rates have escalated rapidly in just over the past year. Variable rate mortgage holders have faced payment shock and seen either payments rise rapidly and/or amortizations extended.
As I always advise my buyer clients, it is for this very reason that it is critical to purchase a home within traditional affordability guidelines. See my web posts on affordability guidelines and budgeting to better understand why overextending is a high risk endeavour, as many homeowners are now learning the hard way.
See "Breaking down the Bank of Canada's unexpected June hike" from the Financial Post, below: