Fluctuating Rates, Clarified
In an unscheduled announcement, the Bank of Canada lowered its target for the overnight rate today by fifty basis points to 0.25%, down from 0.75%.This decisive fiscal action signals the Bank’s response to the economic shock waves that can be felt throughout our country – in every industry and every household. The intent behind this lowered rate is trying to ease the cost of borrowing and keep credit available for the people and companies who need it now.
At this time we don’t know if the Chartered Banks will pass along the full .5% in their Prime rate for their customers to benefit as well. We will definitely keep you posted on that front.
In what feels like a contrary move, fixed mortgage rates have been rising over the last few days. Lenders have also slashed or eliminated variable rate discounts, many of them are now only offering “prime plus” adjustment factors. These are risk-management strategies on behalf of the banks in an unusually uncertain time where those institutions need to consider an increase in mortgage delinquencies and overall long-term economic volatility. Those looking to lock-in at current rates will pay a premium that considers that “new normal” for all the Banks.
Essentially, the only financial winners from the Bank of Canada cuts are the existing variable-rate mortgage holders.
Our team will continue to monitor our local conditions and keep you updated on what these changes mean for your mortgage.