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Bank of Canada Makes a ‘Jumbo’ Rate Cut

Author: Cody Rowe - Mortgage Broker | | Categories: Bank of Canada , homebuyers , interest rates , Mortgage changes , Real Estate

If you didn't already hear, Bank of Canada made a BIG announcement last week and made what’s called a ‘jumbo’ rate cut, reducing the prime lending rate by an entire half percentage point (0.50%)!

 

This is really important for anybody who's out shopping for a home, has an upcoming mortgage renewal, or is currently in a variable rate mortgage. Let's talk a little bit about what this means to you and how this affects your situation.

 

 

So instead of talking about specifically what yesterday's rate cut did by itself, let's talk about what all of the rate cuts in aggregate have done since June of this year.

 

Starting in June, the prime interest rate was at 7.20%.

After last weeks rate cut, the prime lending rate now sits at 5.95%.

So they've cut the prime interest rate by a percent and a quarter (1.25%).

 

What this means if you have an adjustable variable rate mortgage currently, meaning that the payment fluctuates as the prime adjusts, you're going to see your payment drop by a total of about $76/month for every $100,000 of mortgage debt that you owe.

And you're also going to see an approximate savings of $6,000 over a five-year term for every $100,000 of mortgage debt.

 

If you have what's called a ‘static’ variable rate mortgage, then that means your payment isn't going to change but instead more of that same payment is now going towards paying down principal than it is paying towards interest, which is of course great news as well.

 

If you have a home equity line of credit (HELOC), this means that for every $100,000 of line of credit debt that you own, you're going to see that interest payment be reduced by about $100.

 

 

Going forward, future projections anticipate that we're going to see more future rate cuts from the Bank of Canada. The next meeting is on December 11th, and with inflation at 1.6%, but unemployment up at 6%, and consumption down with GDP, the Bank of Canada is going to look to stimulate the economy further with future rate cuts.

 

So keep a close eye on December 11th, even mark it on your calendar, because it's going to be an important day to see what they decide to do with future rate cuts going forward.

 

If you have questions on your own situation, feel free to give us a call, or send us an email. Hope you guys are having a fantastic week, and talk to everybody soon.

 

Article by:

 

Cody Rowe

Mortgage Consultant

Dominion Lending Centres

Modern Mortgage Group

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Keywords: First time buyer, mortgage changes, Bank of Canada, real estate changes, mortgage refinance, mortgage renewal, interest rates

 

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