While it wasn’t a big surprise, I was still hoping that the Canadian Prime Rate would stay at 0.75% for a little bit longer than this. Unfortunately for me and my line of credit, the Bank of Canada has decided to raise the Canadian Prime Rate at 1.00% (which means that your line of credit will reach 3% at best tomorrow morning!).
Mr. Carney also said that further move on the Canadian Prime Rate will not only be directed by the Canadian economy and current low inflation but also according to the world’s economic situation, leaving him more room for a pause in October.
In fact, if interest rate goes up to quickly, this will push the Canadian Dollar to a higher level (at parity or over parity) and would probably have negative effect on the Canadian economy. On the other side, this is with no surprises that we will reach a 3-4% level in a few years as it is considered to be a neutral rate. Having a 1% rate is considered to be a great stimulus for the economy.
My final thought: stay variable but pay down your debts faster!
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