The Bank of Canada has announced another policy rate cut of 25 basis points, bringing the rate down to 4.25%. This marks the third rate cut of the year and offers potential relief for Canadians with variable-rate loans, including mortgages.
What’s Next?
Following the Bank of Canada’s decision, lenders typically take a few days to adjust their prime rates. We expect the prime rate, which influences variable-rate mortgages and other loans, to soon decrease to around 6.45% at most major financial institutions. TD Bank, known for slightly higher prime mortgage rates, could lower it to approximately 6.60%.
How Does This Impact You?
Here’s what this change could mean for you, depending on your loan type:
Fixed-Payment Variable-Rate Mortgages: If you have this type of mortgage, the interest portion of your payment will decrease, while your total monthly payment should remain the same. Over time, more of your payment will go towards the principal.
Adjustable-Rate Mortgages: If your mortgage payments fluctuate with changes in the prime rate, you’ll notice a slight reduction in your next payment.
Fixed-Rate Mortgages: This rate cut won’t impact those with fixed-rate mortgages until it’s time to renew, but it may signal lower rates in the future.
Other Prime-Linked Loans: Personal loans or lines of credit tied to the prime rate will likely see reduced interest charges or smaller monthly payments.
The Bigger Picture
For homeowners and borrowers, this is positive news. As the prime rate decreases, it helps ease the financial burden on those with variable or adjustable-rate loans. In the coming days, we expect to see banks respond by adjusting their lending rates accordingly.
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