Moving On Up: The Bank of Canada Hiked. Your Move Depends on One Thing.

A quarter point, and a very clear message

There's an M People song called Moving On Up. It came out in 1993 and it's a breakup anthem, technically. Heather Small belting about packing her bags and leaving someone behind, and I've had it stuck in my head since about ten this morning. Because the Bank of Canada's policy rate just moved on up, and a lot of variable-rate homeowners are wondering whether it's time to break free too.

The move itself is a quarter point, taking the policy rate to 2.50%. If you hold a variable mortgage or a home equity line of credit, this one is for you. If you're in a fixed rate, keep reading, but you can relax a little.

The reason they gave is straightforward. Oil has stayed expensive for most of the year, that's pushing up the cost of making and moving everything else, and businesses are telling the Bank they plan to pass more of those costs on to you over the next year. The Bank moved now to stop high energy prices from spreading into the price of everything.

Their own words on what comes next: there could be a need to raise again, but they'll proceed carefully. We read that as a Bank that's ready to go once more if inflation keeps surprising them, and happy to sit still if it cools. We'll know more on December 9, which is their next announcement date.

If you're in a variable rate, this one's yours

A Bank move shows up in your variable rate because lenders move prime with it, usually within a day or two. Prime is sitting at 4.45% today, so expect 4.70% to land shortly, and your rate to step up by the same quarter point.

On a $500,000 mortgage with 25 years left, a quarter point adds about $67 a month. Not nothing, but not the number that should drive a decision. The number that should is how much more the Bank might do from here, and whether your budget has room for it.

If your payment is fixed inside a variable mortgage (the kind where the payment holds and more of it quietly goes to interest), nothing changes on your statement this month. Check your trigger rate anyway. We can tell you in two minutes where you stand.

If you're in a fixed rate, you can exhale

Nothing, today. Your payment is locked for the rest of your term. Fixed mortgage rates don't follow the Bank directly. They follow what the Government of Canada pays to borrow for five years, and that moves on where the market thinks rates will be over the next five years, not where they are this morning.

That matters because the market saw a hike like this coming and had already built it in. The five-year government borrowing rate closed yesterday at 3.57%, roughly where it's been for weeks. If that holds, fixed rates should hold too. If the Bank's tone pushes it higher over the next few days, lenders usually move their fixed rates within a few business days, and we'll see it in our daily rate pull first.

Variable or fixed right now: the honest version

Today's lowest five-year variable with our lenders is 3.70%, and the lowest five-year fixed is 4.39%.

After prime moves, that gap shrinks from about $187 a month to about $120 on the same $500,000 mortgage.

A gap of $120 a month buys you roughly two more quarter-point hikes before fixed would have been the cheaper call over the term. The Bank just said more hikes are possible. It also said its preferred inflation measure, the one that strips out the noisy stuff, is still close to 2%. So this is genuinely close, and it comes down to your budget, not the market.

Go variable if a couple more hikes would be an annoyance rather than a problem, and you might move, refinance or sell inside five years. Go fixed if a rising payment would keep you up at night, or your budget is tight enough that the next surprise matters.

Your move this week

Variable with a payment that moves: look at your budget with a payment about $70 higher per $500,000 borrowed, and then again at $140. If the second number works, you have room to stay. If it doesn't, we should talk about locking in or a payment plan before the next announcement, not after.

Variable with a fixed payment: find your trigger rate. It's on your mortgage statement or a phone call away. If today's move puts you close, that's the conversation to have now.

Renewing in the next six months: get your renewal offer in writing early and compare it against the market. Your lender's renewal letter is their first offer, not their best one, and in a rising-rate stretch the gap between the two tends to widen.

Fixed and not renewing soon: enjoy it. Check your prepayment room if you want to use the quiet stretch to get ahead.

And if you're variable and the song's still playing: moving on out of your variable rate isn't disloyal, and staying isn't reckless. It's just math. Run yours before December 9 and you get to choose instead of react.