Interest rates Canada: What you need to know

In simple terms, interest rates are the cost of borrowing money. When you take out a mortgage, you're borrowing money from a lender, such as a bank or credit union. The lender charges you interest on the amount you borrow, and this interest is added to your monthly mortgage payments.

The Bank of Canada is responsible for setting interest rates in Canada. The bank uses a variety of factors to determine interest rates, including economic growth, inflation, and employment levels. When the economy is growing, the bank may raise interest rates to slow down borrowing and spending. When the economy is slowing down, the bank may lower interest rates to encourage borrowing and spending.

When interest rates go up, your monthly mortgage payments will go up. This is because the lender is charging you more interest on the amount you borrowed. When interest rates go down, your monthly mortgage payments will go down. This is because the lender is charging you less interest on the amount you borrowed.

When you get a mortgage, you can choose to lock in your interest rate for a period of time, such as five years or ten years. This means that your interest rate will not change during that time, even if the Bank of Canada raises or lowers interest rates. Locking in your interest rate can give you peace of mind and help you budget for your monthly mortgage payments.

Interest rates can have a big impact on your monthly mortgage payments and your overall cost of borrowing. It's important to understand how interest rates work and how they can affect your mortgage before you get started with the application process.

• Shop around and compare rates from different lenders.
• Get pre-approved for a mortgage before you start shopping for a home.
• Lock in your interest rate for a period of time.
• Make sure you have a good credit score.
• Make a large down payment.