What does the Bank of Canada’s recent rate cut mean for your mortgage?
The Bank of Canada has reduced its policy rate by 50 basis points (bps), bringing it down to 3.75%. This is great news for borrowers, particularly those with variable-rate mortgages, as their costs will drop even further. Let’s break down what this BOC rate cut means for you.
Variable Rate-Mortgages
If you hold a variable-rate mortgage, your monthly payments will decrease. For every $100,000 of mortgage debt (based on a 25 year amortization), your payments could drop by roughly $30 per month. For an average $400,000 mortgage, this means an extra $120 in savings each month.
If you have a Adjustable-Rate Mortgage:
- Both your interest rate and your monthly payment change with the prime rate, so you will feel immediate relief in your next payment.
If you have a Fixed-Payment Variable-Rate Mortgage:
- Your monthly payment remains the same, but more of your payment will go toward reducing the principle, allowing you to pay off your mortgage faster.
Fixed-Rate Mortgages
If you have a fixed-rate mortgage, your payment won’t change today, but fixed rates have been trending down as well. Keep an eye on bond yields, which influence fixed-rate pricing.
HELOCS and Lines of Credit
If you have a Home Equity Line of Credit (HELOC) or a personal line of credit, expect lower interest costs. The average HELOC holder could see their monthly interest costs reduced by about $18.
Now is the perfect time to review your mortgage strategy. If you are unsure if you should stick with your variable rate or lock in a fixed rate, Steve D’Souza and Nathan Isherwood at Client First Mortgage Solutions are here to answer all of your questions.
Original Article – Canadian Mortgage Trends – Steve Huebl – October 23, 2024
