It has now been two weeks since the most recent .25% cut to the Bank of Canada’s overnight rate. My question is “What is the impacted to you and your mortgage?”
1. Despite the .25% reduction, the Prime Rate in which banks lend money, only reduced by .15%. This is the second time this year that the banks have not passed on the full cost of their savings to consumers, as a result of the rate reduction. One wonders when rates increases, if the banks will not pass the full cost of a subsequent rate increase onto consumers.
2. If you have an existing variable rate mortgage you will see cost savings on your monthly payments. Your exiting rate will have decreased by .15%, as the prime rate in which the banks lend money is now 2.70%
3. If you have a fixed rate mortgage you would have seen no change to your mortgage. Rates for new fixed rates mortgages have not been impacted by the deduction in the prime rate. There is no direct correlation between fixed rates and the prime rate but there is typically some movement with fixed rates as well, that may be a benefit to those seeking a new mortgage.