When the Bank of Canada raises the overnight rate (also known as the policy rate) this can impact how much you need to pay each month on your variable rate mortgage or line of credit. Read on for tips to manage changing rates.

What is the prime rate and why should you care?

The prime lending rate (prime rate) is the rate that Coastal Community and other financial institutions use as a base to determine interest rates for loans and mortgages, and it’s set by the Bank of Canada, based on the overnight rate. Most financial institutions set their lending interest rates at prime plus one percent. You need to be aware that when the prime rate goes up or down, your variable mortgage rate will go up or down by the same amount, affecting your monthly payment.

Is there anything you can do?

Yes! When interest rates are increasing, it's a good idea to pay down any variable rate debt you have, such as a line of credit. It’s also worth your while to talk to an expert about your options to reduce your risk of not being able to afford your monthly payments.  A customizable and flexible product like our CreditMaster^® mortgage allows you to have a combination of fixed and variable rate products. For a minimal fee, you can also convert one large product to two or three smaller products that total the same amount.

How does CreditMaster^® help?

Our experts can help you offset the risk of a variable rate mortgage. Imagine you have our Primeline line of credit attached to a variable rate CreditMaster^® mortgage of $195,000. After sitting down with one of our experts to assess your risk tolerance, you may want to do something like move $100,000 to a fixed rate mortgage for five years, minimizing risk exposure.*

If you have any questions, don’t hesitate to reach out to one of our experts to discuss your specific situation.

* All examples are hypothetical and are for illustrative purposes only.