Manitobans' mortgages likely going up due to rising interest rates

For many Manitobans, their mortgages are likely going up because of rising interest rates.

This week, the Bank of Canada increased its key interest rate by .05 per cent to 1 per cent, the largest hike in more than 20 years.

The goal is to bring soaring inflation under control. With supply issues and high demand driving costs, people are struggling to pay for everyday items.

“The economy is strong, it can handle higher interest rates, it needs higher interest rates,” said Bank of Canada Governor Tiff Macklem.

Economists say the rate hike is meant to curb demand.

“They’re trying to reduce inflationary pressures, but not put us into recession. That’s the tightrope that they’re walking,” said U of W Economics Professor Phil Cyrenne.

The rate hike will likely see people with lines of credit and variable mortgages pay more. According to Castle Mortgage Group, those on a variable mortgage could expect to pay an extra $24 monthly per $100,000 of the mortgage amount.

Broker Lisa Kanski said from a historical standpoint rates are still very low and says variable mortgages may still be desirable.

“If you could still get 2.2 per cent, 2.3 per cent on the variable, versus 3.79 per cent, 3.89 per cent on the fix, that’s a big spread,” said Kanski.

But the central bank warns this may not be the last hike this year. Plus there is a concern the rate increase and any future ones could push those struggling to get by to default on their mortgage.

Federal Finance Minister Chrystia Freeland points out Canada does have regulations in place to prevent widespread defaults.

“We have stress tests designed to be sure anyone taking out a mortgage could get through a period of higher interest rates,” said Freeland Wednesday.

The Bank of Canada’s next interest rate announcement is set for June.