Bank of Canada Drops the Prime Lending Rate (Again)!
With Canadian inflation down to 2.70% in June, Bank of Canada blessed Canadians with another decrease in the overnight lending rate from 4.75% to 4.50% to assist with further reduction in the inflation numbers.
This means the prime lending rate will decrease accordingly from 6.95% to 6.70%.
What does this mean if you have a variable rate mortgage?
If you have an amortized variable rate mortgage you’ll either see a reduction in your payment or reduction in your interest costs, depending on whether you have an “adjustable” variable or a “static” variable. Which one you have will depend on who your mortgage lender is.
If you have an adjustable rate, this will result in approximately a $15-$16/month reduction in your principal and interest payment for every $100,000 of mortgage money you owe.
If you have a static variable payment, your payment will remain the same but you will now save about $20 of interest for every $100,000 of mortgage money you owe.
Similarly, if you have a balance on an existing home equity line of credit, you’ll see a reduction in your interest-only payment of $20/month for every $100,000 of mortgage money you owe.
What can we expect going forward?
With inflation getting closer to the key mark of 2% and the economy in excess supply, economists are now predicting two more rate cuts by the end of year to bring the overnight rate to 4%. Nothing is guaranteed however and Tiff Macklem the governor of the Bank of Canada will continue to base their decisions on future economic reports.
"It is reasonable to expect further cuts, but the timing is going to depend on incoming data. And importantly, what that data tells us about where inflation is heading," – Tiff Macklem
When does the Bank of Canada meet again to announce future rate cuts?
The Bank of Canada will meet again on the following dates to discuss and announce any future changes to the overnight lending rate:
- Wednesday, September 6th
- Wednesday, October 25th
- Wednesday, December 6th
Do you have questions on how this affects your upcoming mortgage renewal or home purchase?
Schedule a call with us to find out how we can help.
Article written by:
Cody Rowe
Senior Mortgage Consultant
Dominion Lending Centres
Modern Mortgage Group
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