What You Need to Know About the Bank of Canada’s Move
The Bank of Canada has reduced its policy rate by 25 basis points to 4.5%. This adjustment is part of the central bank’s efforts to support economic growth amidst ongoing challenges posed by higher inflation rates.
If you have a mortgage or line of credit with a variable interest rate tied to the prime rate, you can expect a reduction in your interest payments. Variable rates are directly influenced by the Bank of Canada’s policy rate changes.
However, fixed mortgage rates, which are influenced by the bond market, may not see an immediate change. Last month, there was a slight decrease in fixed rates following the Bank of Canada’s rate announcement, but it’s too early to predict if a similar trend will occur this time.
Currently, an insured fixed-rate mortgage averages around 4.64%, while a variable rate stands at approximately 5.75%. The question remains whether variable rates will continue to decline enough to compensate for initially higher rates and potentially benefit from further decreases in the future. I wish my crystal ball hadn’t shattered about 2 years ago!
Despite inflation levels being above target in many advanced economies, including Canada, there is optimism about a gradual easing of inflationary pressures. This forecast suggests that strategic monetary policies could help stabilize the economy over time.
If you’re considering buying a home, refinancing, or making financial decisions affected by interest rates, it’s crucial to stay informed about these developments. Lower policy rates can offer opportunities to secure better borrowing terms and potentially save money over the life of your mortgage.
