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What rising interest rates mean for your mortgage

This past July, the Bank of Canada raised its benchmark interest rates for the first time in nearly seven years. According to economists, the hike was a sign of broadening economic growth and confidence—good news for Canada’s economy. For many Canadian homeowners, however, July’s increase from .5 to .75 per cent raised concerns about increasing mortgage payments.

A second rate increase of a quarter per cent announced on September 6 didn’t boost homeowners’ confidence.

On paper, an increase of a quarter per cent doesn’t sound like much, but it makes a difference. If you have a variable rate mortgage of $250,000 at 2.75 per cent, a quarter per cent increase can add an additional $30 to your monthly mortgage payment, or $360 over the course of the year. For many people, that may mean trimming expenses.

Tightening your budget takes work, but it’s not impossible. A quick Google search will yield plenty of great ideas on how to spend less on groceries, transportation and entertainment, without compromising your quality of life. We’ve published some articles of our own.

Alberta’s recent economic challenges have already stretched some people to the limit. For them, all the tips in the world won’t help because they simply can’t squeeze their budget any further. But there are options.

One is to consider switching from a variable rate mortgage to a fixed rate mortgage. Although fixed rates are generally higher than variable rates, it’s a change that will shield you from rate fluctuations.

Have questions or comments on how the Bank of Canada rate will affect you? Talk to an ATB mortgage specialist. We’re listening.

ATB Financial

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