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Bank of Canada Finally Drops Rates!

Author: Cody Rowe - Mortgage Broker |

 Blog by Cody Rowe - Mortgage Broker

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.

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?”

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!

Article by:

Cody Rowe
Senior Mortgage Consultant
Dominion Lending Centres
Modern Mortgage Group

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