The Bank of Canada (BOC) interest rate directly impacts mortgage rates in several ways, depending on the type of mortgage you have. Here’s how it could affect you:

1. Variable-Rate Mortgage

If you have a variable-rate mortgage, your interest rate is tied to your lender’s prime rate, which is influenced by the BOC’s rate.

• If the BOC raises rates: Your mortgage payments will increase, meaning you’ll pay more interest and less towards your principal.
• If the BOC lowers rates: Your payments will decrease, making borrowing cheaper.

Fixed Payment Variable-Rate Mortgages: Some lenders keep your payments the same but adjust the portion going to interest vs. principal. If rates rise too much, you may hit a "trigger rate," where payments no longer cover interest, requiring an increase.

2. Fixed-Rate Mortgage

If you have a fixed-rate mortgage, your interest rate won’t change until your term is up. However:

• If the BOC raises rates: New fixed-rate mortgages will become more expensive. If your term is ending soon, you might face higher rates when you renew.
• If the BOC lowers rates: You could lock in a lower rate when you renew.

3. Mortgage Renewal & Affordability

• If you’re renewing your mortgage soon, a higher BOC rate could mean higher payments when you switch to a new term.
• If you’re buying a home, higher rates reduce borrowing power, meaning you qualify for a smaller mortgage.

4. Home Equity Lines of Credit (HELOCs)

HELOCs have variable interest rates, so an increase in the BOC rate will directly raise your interest costs.

What Should You Do?

• If you have a variable rate: Consider whether you can handle potential increases or if switching to a fixed rate makes sense.
• If your mortgage is up for renewal: Start shopping around early for the best rates.
• If you’re planning to buy a home: Higher rates might mean adjusting your budget.