With more and more predictions of a rate cut, the Bank of Canada came through and lowered their overnight rate by 0.25% The announcement was made at 10:00am (July 15th, 2015).
So what does this mean?
Usually, it would mean that prime rate would drop by 0.25% as well to match the cut. Each bank sets their own prime rate, and after the unexpected rate cut the end of January, banks only lowered their prime rates by only 0.15% and never came through matching the cut. This is the first time they have not fully met the cut.
So it will be very interesting to see what happens this time. It's quite likely that they will match with some sort of cut, however whether they match the full 0.25% rate cut remains to be seen. Or whether they make any cuts at all. For now, the prime rate remains 2.85%.
There has not been an increase to prime rate since September 2010 which is the longest streak in history.
With variable rate mortgages as low as prime -0.80% (2.05%), we may very well see variable rates under 2.00% once again.
For anyone who has a home closing soon, has a renewal coming up or considering refinancing, if you are looking for a variable rate, I would not hesitate to get something locked in. With this rate cut, it's extremely possible that lenders will now start cutting their discounts off prime (i.e. - prime -0.80% to prime -0.70%).
You can read more about the rate cut here:
http://www.bankofcanada.ca/2015/07/fad- ... 015-07-15/
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Paul Meredith
Mortgage Broker
CityCan Financial (est 1976)
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http://www.easy123mortgage.capaulm@citycan.comLic#10532
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