Impact of the key interest rate increase

September 9, 2017 Buying,Mortgage

Article sourced from my Fall 2017 Newsletter


For the first time in 7 years, the Bank of Canada raised its key interest rate to 0.75%, an increase of 25 points. The key interest rate is the rate at which the Bank of Canada lends money to the country’s various financial institutions, so while this is a sign that our economy is doing well, the increase will have an impact on mortgage rates.

Short-term effects

According to the Québec Federation of Real Estate Boards (QFREB), the hike in the key interest rate will have a direct impact on variable-rate mortgages, as well as on short-term fixed-rate mortgages (6 months and 1 year). This means, as a homeowner with a variable-rate mortgage, a home line of credit, or any type of loan associated with the key interest rate, you will see an immediate impact on your interest rate.

From now until the end of the year, the QFREB believes we will most likely see a gradual increase in 5-year mortgage rates. Some banks already started to increase their rates when the Bank of Canada rate increase became imminent.

We will most likely see a gradual increase in 5-year mortgage rates

Minor impact on payments

While the increased rate will impact your mortgage payments, the increase will not be significant. For example, for a total loan of $250,000 at an interest rate of 2.70%, a borrower will see their monthly payment increase from $1,144.97 to $1,176.71 at a rate of 2.95%, a difference of $31.74.


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