07 February 2015
Ken Ramsay

Lending Rates are Dropping- What Does This Mean to You?

Photo Source: TudorMortgage

The Bank of Canada announced last week that it is lowering its target for the overnight rate by one-quarter of one percentage point to 3/4 per cent. This decision is in response to the recent sharp drop in oil prices.
 
Major banks, such as Scotiabank, Td and other financial institutions, have already lowered their prime lending rate to 2.85% from 3%.  For those of you with a variable mortgage or lending product where your interest rate is tied to bank prime, your interest rate and monthly payment will be lowering accordingly.   If you’re looking to purchase a home variable rate mortgages can be had for 2.2% and even lower with some lenders.
 
A battle in the mortgage market seemed inevitable given that Government of Canada bond yields have plummeted in recent weeks, falling 57 basis points in the past month to historic lows. Brokers had predicted that falling bond yields were almost certain to drive down the fixed-rate mortgage pricing ahead of the competitive spring housing market.
 
Most predict that the banks will decrease the prime rate further to match the key rate decrease seen last week and bring the prime rate down to 2.75%. Furthermore, if bond yields continue to decrease, the fixed rate market will also see further drops.
 
This is great news for the real estate market and client’s who are looking to take advantage of these historic low rates and possibly look at ways to save money on outstanding debts they currently have.  If you’re thinking of purchasing a home this year get pre approved now!  It cost nothing and will let you know what you can afford.