Many financial pundits think the Bank of Canada will raise the key interest rate tomorrow. As I have a variable rate mortgage, such a change is of interest to me (get it?).
Since I bought my home, the key interest rate has changed just five times and the last increase was almost seven years ago. It’s been a good seven years from a debt perspective. I don’t know how much the BoC will raise the rate but I’m hoping it won’t be more than 0.25%. My mortgage will undoubtedly be more but how much more is the question.
Will such a move put me in dire straights? No, but there will be less money to go around and the bigger question is, when is the next rate hike? Does this signal more frequent and larger hikes? Let’s see what happens tomorrow.
Here in Geneva interest rates are extremely low, but housing prices are exceedingly high. They have 100 year mortgages, in which you pay 1% of the principle every year and the rest is just interest payments. It makes it very cheap to own a house or apartment if you can get over the fact you need a down payment of roughly 200,000 swiss francs. Rent on my two bedroom apartment is 2700 chf per month. If I owned the place on a 100 year mortgage I would probably pay about a third less each month in mortgage payments.
Another interesting fact…they negative interest rates in Switzerland (-0.75%). They are designed to keep people from dumping massive amounts of money into swiss francs for protection, which drives up the cost of the swiss franc internationally. https://www.ft.com/content/bcc092fc-7743-11e6-a0c6-39e2633162d5?mhq5j=e3
I actually have a positive interest rate in my own bank account here (as a very small user), but it is minimal.
Wow, thanks for the Swiss info! It’s fascinating how different some economies and real estate markets can be.