For the first time in 7 years, the Bank of Canada, as expected, has increased their overnight rate to 0.75% from 0.50%.

The bank stated that the, “Canadian economy has been robust, fuelled by household spending” (CBC). This means that a large amount of “economic slack,” has been absorbed, and Canada’s economy is balancing out.

The rate was originally lowered to help with the oil price fallout and other economic issues. The low rate allowed for Canadians to overload themselves with debt, mainly concerning mortgages and lines of credit. This, in turn, drove up housing prices in hot housing markets, such as Toronto and Vancouver.

Another rate hike is apparently not on the minds of Poloz and the Bank of Canada yet. They will wait and see what the falling inflation does to the economy.

What does this mean for mortgages? Those locked into a variable rate mortgage, or with a line of credit, will see their payments and rate go up. Their discount, if they have one, will stay the same but the rate will increase as the banks will increase their prime lending rates.

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Sources: CBC, Globe and Mail