When Do They Change Rates?
PSA: Rates for variable mortgages and HELOCs may wiggle, but at least you can set your clock to WHEN they wiggle.
Do you have a variable mortgage/home equity line? Here’s a little PSA. Clients with these products often ask me WHEN banks decide to change those rates (and thus your payments!). It actually happens on a set schedule – eight times per year.
Here’s the 2018 Schedule:
- January 17
- March 7
- April 18
- May 30
- July 11
- September 5
- October 24
- December 5
Variable rate mortgages and HELOCs are priced at (a discount or premium to) your lender’s Prime rate, and as you know, Prime itself fluctuates. And when Prime goes up or down, so do your variable mortgage/HELOC payments in most all cases.
Banks adjust their Prime rates based substantially on the cost of borrowing short-term funds among themselves. That cost of short-term funds is known as the Key Policy Interest Rate or target overnight rate, and representatives of the Bank of Canada (“BOC”) meet to determine and announce that rate on the schedule set above.
The rate has historically been adjusted in increments of 0.25% and mortgage lenders have almost always adjusted their Prime rates by the identical increment. For example on January 17 this year, the BOC increased their Key Policy Interest Rate from 1.00% to 1.25%; and within days the Prime rate for all lenders increased the same 0.25%, from 3.20% to 3.45%.
In case you missed it – neither rate changed this week. And the next BOC announcement is scheduled for April 18 at 7am Pacific.
Whoa. That got a bit boring, but the upshot of my blurb is this. Don’t "wonder when" the rate on your variable mortgage or HELOC may change: nerd out and put it in your calendar! And reach out to me to discuss your situation if there are changes.
Have a good weekend
TS