Bank of Canada Finally Drops Rates!
This month the Bank of Canada decided to finally cut the overnight lending rate from 5.00% to 4.75%.
This means that the prime lending rate has been adjusted from 7.20% to 6.95%.
This rate drop will affect all mortgage holders with either a variable interest rate or those with home equity lines of credit (HELOC).
To put this rate decrease into context, for every $100,000 of mortgage money you are borrowing, you will see your interest costs drop by about $16/month.
Depending on the type of variable rate you have, this will either result in a reduced payment or a reduced amortization. Schedule a call with one of our advisors if you have questions on what this means to you.
According to Dominion Lending Centres’ Chief Economist Dr. Sherry Cooper, “The news came on the heels of weaker-than-expected GDP growth in the final quarter of last year and Q1 of this year, accompanied by CPI inflation easing further in April to 2.7%.”
She adds, “While the overnight rate is likely headed for 3.0% (by the end of next year), it will remain well above the pre-COVID overnight rate of 1.75% as inflation trends towards 2%+ rather than the sub-2% average in the decade before COVID-19”
So it appears there are positive signs ahead for all those looking for a break from the historic jump in interest rates.
One of the questions we received a lot when they dropped the rate this month is, “Why are fixed rates not dropping too?”
This is because the fixed interest rates are connected to the Government of Canada’s 5-year bond yield, not the overnight lending rate. So if you are interested in keeping an eye on where fixed rates are going, you can click here to see the chart.
Currently variable rates have a lot of room to make up before they compare to the current fixed rates.
So when do we find out if we get more rate drops this year?
The Bank of Canada’s meets again this year on the following dates to discuss monetary policy and whether to drop the overnight rate further:
- July 24th
- September 4th
- October 23rd
- December 11th
Fingers crossed we get some more good news!
If you have questions about your specific situation, contact your personal Dominion Lending Centres agent or schedule a call with us today to find more. You can also email us your questions by clicking here.
Article by:
Cody Rowe
Senior Mortgage Consultant
Dominion Lending Centres
Modern Mortgage Group
