The Bank of Canada hiked its interest rate for the first time since 2018. With a couple of more hikes looming this year, there is a direct impact to all Canadians. But, how does the increase impact you?


In anticipation of an interest rate hike, banks and credit unions steadily increased their fixed rates over the past year. In spring 2021, the standard mortgage was 5-year fixed at 1.8%. However, by the end of 2021, banks were offering the same mortgage at 2.8%, a whopping 1% increase without any rate hike. The outcome? Lenders put the extra 1% in their pocket on fixed-rate mortgages. As such, in the past 6 months, most Canadians opted for variable rate mortgages that were unchanged over the past year, ranging from 1.2% to 1.45%.

Let’s look at market rates over the past couple of years:


It is true that market dynamics from the pandemic causing suburban sprawl led to record high growth in the real estate market. This was fueled by low interest rates. In a world without the pandemic, we would have seen interest rates hike sooner, with a more stabilized realty market. Buyers should factor in rising interest rates into their housing costs in order to establish the market value of the home under consideration. 

The cost of a 1% or 2% rate hike to the average GTA home at $1.2M can cost $45K to $90K more in the next 5 years. With 20% down for a mortgage of $960,000 with a 25 year mortgage term, the increase in costs over the term can be $140K to $295K based on the numbers below.

It’s important to have your real estate and mortgage strategy aligned. Contact your Planulife Advisor for a full assessment on how the rate increase impacts your plan.


With stress-testing, borrowers are approved at the greater of 5.25% or the contract rate plus 2%. As such, interest rate hikes will not directly impact approval limits at this time.

The fixed vs. variable question is quite difficult to make at this time. Analysts are anticipating the overnight rate to increase from the 0.25% previous rate up to around 2.25% over the next two years with a series of rate hikes. This 2% increase will inevitably result in increases to Prime Rates, increasing rates on all variable borrowing. TD Bank already announced their prime rate hike up from 2.60% to 2.85%. 

Variable-rate borrowers: Save to offset increased costs and/or consider locking in a fixed rate

Fixed-rate borrowers: Save or invest to offset future increased costs at renewal time

Contact your Planulife Advisor to evaluate your options.


Interest rate hikes should result in increased returns on income funds. Combined with high inflation rates, now is the time to be aggressive with your income strategy. Several income fund options were underperforming when compared to inflation, and this will continue even with interest rate hikes. Let’s evaluate some options:

Our Planulife Mortgage Income Fund has provided 9%+ returns to investors since 2018. The Fund has absolutely no investment management expenses. As such, interest rate hikes may lead to an increase in yields for our returns. Review our Factsheet and Schedule Consultation to join today.