Advertisement
The Bank of Canada’s interest rate affects everything from your savings account to your mortgage payments. Learn more in this short video.
Think of the Bank of Canada (BoC) as the “influencer of all influencers” when it comes to interest rates. Banks and other financial institutions follow its lead. Learn more about how the BoC’s overnight interest rate impacts you in this short video, featuring MoneySense executive editor Lisa Hannam.
How the Bank of Canada’s interest rate affects youWhen the BoC raises or lowers the overnight interest rate or prime rate, everything from your savings account to your mortgage or line of credit can be affected. Learn more in the table below.
| Type of financial product | When interest rates go up | When interest rates go down |
| Variable-rate mortgages | Your variable-rate mortgage payments may increase if the BoC raises the prime rate. Or, a greater portion of your payments may go towards interest than to paying down your principal. | A greater amount of your mortgage payments will go towards paying down the principal. |
| Fixed-rate mortgages | Your interest rate is locked in for the duration of the loan (typically five years), so increases in the prime rate won’t immediately affect your payments, until you renew your mortgage. | Your interest rate is locked in for the duration of the loan (typically five years), so decreases in the prime rate won’t affect your payments until you renew your mortgage. |
| High-interest savings accounts | Overnight rate hikes are good news for high-interest savings accounts because the interest you earn from your deposits increases—meaning your balance will be a bit higher after sitting in the account. | When rates go down, high-interest savings accounts earn less interest, meaning you earn less from holding your money in this type of account. |
| GICs | You will earn more interest on your investment when interest rates go up. | When rates go down, GICs offer lower interest rates. |
| Variable-rate loans (line of credit, home equity line of credit, etc.) | The amount of interest you pay on your loan increases when the prime rate goes up. | The amount of interest paid on your loan payments will decrease. |
Share this article Share on Facebook Share on Twitter Share on Linkedin Share on Reddit Share on Email
In the face of tariffs and economic uncertainty, is bitcoin a safe haven asset? Plus, gold vs. bitcoin, and...
Maxing out employer contributions is an easy way to boost your retirement savings. Here’s how to do it without...
Created By
Ratehub
Whether you want the highest interest rate or no service fees, these savings accounts will meet your needs.
Find the best GIC rates in Canada. Plus, everything you need to know about how they work.
Which ETFs should you invest in? Which ones best suit your risk tolerance? What about personal ethics? Check out...
Starting May 1, more Canadians can apply for dental care coverage. Find out if you’re eligible for the CDCP...
Plus, Teck Resources sees higher demand for metals, and National Bank buys PGM Global Holdings. Here are the details...
How Tesla and other companies are dealing with the uncertainty of the trade war.
Some Canadian seniors enter retirement without savings or run out of money over time. Here’s how they can stay...