Bank of Canada reduced the overnight rate to 0.25%, therefore Banks are lowering Prime rate to 2.25%. The change will be seen in line of credit lending rates as of April 22nd, and will be reflected in variable rate mortgages as of May 1st, 2009. The Bank of Canada's next scheduled overnight rate announcement is June 4th, 2009.
This Bank of Canada reduction by a quarter of a point today is at the lowest level ever. In its announcement the Bank of Canada also stated that it expects to hold this policy rate at its current level until the end of the second quarter of 2010, conditional on the outlook for inflation.
While rates for variable rate mortgages are typically impacted by Bank of Canada policy rate changes, what's interesting is that rates for popular five-year fixed rate mortgages have been declining significantly in recent months. The reason behind this drop is an abundant supply of money being put into circulation, as well as guarantees of government agencies to purchase mortgage investments.
A comparison of fixed rates today versus six months ago shows a noticeable improvement in purchasing power.
Six months ago, a competitive rate on a five-year fixed mortgage was 5.75 per cent. At this rate, the monthly payment on a $250,000 mortgage with a 25-year amortization was $1,563. With the five-year rate of 3.95 per cent available today, the monthly payment falls to $1,308, which adds up to a savings of $15,300 in payments over the five year term.
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Diane Plant, Broker
Forest Hill Real Estate, Brokerage
(416) 488-2875
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