Today’s announcement from the Bank of Canada signals the second cut this year. Governor Poloz stayed away from saying the word recession but 6 months of declining productivity would indicate a definite slow down.
If you have a variable rate mortgage and are tied to prime you would think we would have seen a more impressive reduction in the amount you are paying off each month. The banks appear to be looking at keeping the extra .25% of the .50% reduction for themselves. If you have an adjustable rate mortgage then you will see a small reduction in your payment with the banks only moving .10%. With 2.75% as the new bench mark among the banks an adjustable rate mortgage will now be in the 2% range which is still a good deal.
We are getting calls already this morning from clients wondering if the fixed rate mortgages will change as well. Fixed rate mortgages are not tied to the bank of Canada rate but are affected by the bond market which is still holding steady. The bond market is a worldwide phenomenon that is affected by everything that happens monetarily around the globe. With ongoing issues in the EU and China having a slowdown Canadian bonds are still a very safe and secure option, money worldwide filters into our bonds on a daily basis. The more money that is coming into the bond market the less that brokers have to pay you for them, 5 year bonds have been below 1% for quite some time and show no signs of increasing anytime soon.
The Bank of Canada announcement as far as mortgages go had little or no effect on your day to day mortgage. Unless the banks loosen up some of their grip on that other .25% then you and I will see very little change in our payments.