If the interest rate hike in July didn't register with consumers, a second quarter-point increase by the Bank of Canada on Wednesday has many borrowers taking a hard look at their mortgages and household debt levels, say mortgage specialists.

"At the end of the day, the cost of borrowing will be higher whether the full quarter-point is passed on through prime,” said Bill Whyte, senior vice-president of Meridian Credit Union. “The banks have already raised their prime by a quarter to 3.2 per cent and most of us will follow in the next day or so."

The central bank's surprise boost of its overnight lending rate to 1 per cent — the rate banks and other lenders use to set interest rates for mortgages and other consumer loans — will affect variable loans, home equity lines of credit and mortgages.

It will almost certainly add a further drag on the Toronto region's dilatory housing market, he said.

"We're still at pretty low rates, but we're not going to be as low as we once were," he said, adding that has many consumers re-evaluating their cash flow.

A full quarter-point translates to about $72 a month on a $500,000, 25-year mortgage, said Whyte. Given that it's the second rate hike this summer, many households are paying more than $100 in additional housing expenses each month since July.

"It's not chump change," he said.

Meridian clients' average mortgage in the city of Toronto is about $430,000. In the areas surrounding the city it's about $230,000.

Toronto-area home buyers tend to be emotional, said principal broker Andrea Jolly of TheRedPin Mortgage Brokerage.

"Even if this interest rate hike doesn't affect them personally, they act like it does," she said.

But many aren't entirely fluent with their mortgages. Those with variable-rate loans aren't always aware they can convert to a fixed-rate mortgage, usually with no cost.

But she encourages clients to run the numbers and consider the costs carefully.

"If you're a flipper (who wants to move a property rather than carry the cost of ownership) this probably is not the best time for you to enter the market,” said Jolly. “But if you're looking for long-term home ownership . . . under 4 per cent is still ridiculously low. It's not a bad time, money is still cheap but it still has to be a long-term strategy rather than a short-term one."

Consumers with home equity lines of credit (HELOC) also need a strategy to pay off those loans because the option of paying the interest-only option on those loans is too flexible, she cautioned.

"Within most lines of credit, banks will allow you to put a portion or all of the balance as a fixed rate so you can mitigate any risks with regards to the interest rates increasing,” said Jolly. “But the flexibility of being able to pay it off at any time is what lures people to that product."

The Financial Consumer Agency of Canada warned earlier this year that 40 per cent of the 3 million Canadians who have lines of credit don't make regular payments on those loans. Twenty-five per cent make only minimum payments or pay the interest. The average HELOC debt was $70,000.

James Laird of RateHub says interest rates are just one variable affecting the Toronto area housing market. But he believes consumers should be prepared for a "consistent and steady rising interest rate environment."

There has already been an increase in the number of clients calling to talk about potentially locking in variable rate mortgages. The decision is entirely individual, said Laird.

"Someone who says, 'I'm comfortable in the variable rate and I'm going to rely on the historical data that nine times out of 10 variable rates are cheaper' — that's a good decision,” he said. “Others, sick of reading the business section and not sleeping — that person should definitely lock in."

While July's rate hike didn't appear to push Toronto-area home buyers off the sidelines, Laird said there are signs that housing market activity may be picking up after a traditionally sleepy summer with more listings on the market this week at "adjusted price levels."

Like banks, mortgage brokers must rigorously assess clients' overall debt levels.

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Laird said he loves telling people to think in terms of car payments. A $450 monthly car payment reduces the amount of mortgage you qualify for by about $100,000. The car is a depreciating asset. The home will almost certainly increase in value.

"We think it's prudent to buy a house. That has caused great wealth creation for Canadians for the last 100 years," he said.

While they're fun, the same can't be said for cars with leather seats and wine with dinner.