Good news!
On October 23rd, the Bank of Canada reduced the overnight rate by one half percentage point, lowering it to 3.75%. This is a cumulative cut from the peak by 1.25%.
This cut was the fourth consecutive one this year, and will bring much welcome relief to anyone holding a variable rate mortgage, or any other lending product such as unsecured lines of credit directly tied to a lender’s prime interest rate.
How and when will this get passed along?
Lenders typically adjust their prime rates following any Bank of Canada moves within a day or two. We’re expecting the prime rate to drop to around 5.95% with most lenders.
What does this mean for you?
- If you have a variable-rate mortgage: You will be happy. You should experience lower interest costs of approximately $150 on a $500,000 mortgage, assuming a 25-year amortization, shortly. For variable rate mortgages with fixed payments, your interest cost should decrease and your principal repayment should increase. If your payments aren’t fixed, your monthly payment should decrease accordingly.
- If your mortgage has a fixed interest rate: Then no changes, however hopefully this continues to bode well for future rate drops with fixed-rate mortgages in time for your renewal, depending on the bond market.
Other financial products tied to the prime rate: Things like secured and unsecured lines of credit should also benefit from this rate decrease.
Where Are We Headed ?
The Bank of Canada’s next rate decision is scheduled for December 11, 2024, and it is already expected that there will be another rate cut announced at that time. We are keeping our fingers crossed for more rate cuts ahead to help make life a bit more affordable for everyone
If you have any questions about how this change can affect your situation or would like any additional information, free advice is always a call away. Call us at (905) 309-8799!