The Bank of Canada reduced its key interest rate by ¾ of a point today. In its announcement the Bank stated that Canada's economy is now entering a recession as a result of weakness in global economic activity. However, the Bank also noted that “money markets and overall credit conditions in Canada are responding to significant and ongoing efforts to provide liquidity to the Canadian financial system.”
An Mortgage Direct2u Invis Mortgage Consultant can explain current trends in interest rates, and their effect on mortgage pricing. Those with existing variable rate mortgages will benefit directly – these mortgages are linked to the prime rate. However, there can be some variation in when lenders react to a Bank of Canada rate announcement. There are lenders who change immediately after a Bank of Canada rate move, while some lenders re-set their prime rate on the first of the month following and some even do so quarterly. In addition, after the Bank’s last rate announcement, some lenders matched the Bank’s drop only after a delay.
Currently, pricing for new variable-rate mortgages is generally above the prime rate. Those looking for a new variable-rate mortgage may wish to get pre-approved, to protect themselves if variable-rate pricing in relation to prime continues increase in the next few months.
Pricing for fixed-rate mortgages is not directly affected by today’s announcement.
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