Bank of Canada cut will prompt lower variable mortgage rate costs: Ratehub
Experts say homeowners with variable mortgage rates will benefit from lower monthly payments after the Bank of Canada‘s latest cut to its key policy rate.
On Wednesday, the major six banks announced they would decrease their prime rates by a quarter-percentage point, from 5.45 per cent to 5.2 per cent, effective the following day. That came after the Bank of Canada cut its key interest rate target for the sixth consecutive time since June.
The central bank also lowered its rate by a quarter percentage point, bringing it down to three per cent, as it said inflation is sitting around its two per cent target while the economy picks up speed.
Ratehub.ca mortgage expert Penelope Graham said that decision should lead to lower variable mortgage rates across most Canadian lenders.
Calculations conducted by Ratehub indicate that a homeowner who put a 10 per cent down payment on an average priced home in Canada — $676,640 as of December 2024 — would pay around $87 less per month with a five-year variable rate.
Fixed mortgage rates are also set to decrease slightly as bond yields ticked down to the 2.8 per cent range following the central bank’s announcement, but Graham said investor concerns over potential inflation will prevent any “dramatic discounts” in the near future.
“Those who currently have a variable mortgage rate will see either their monthly payment lower if they have an adjustable-rate mortgage, or the portion of their payment servicing interest costs decrease, if they’re on a fixed payment schedule,” she said in a statement.
Ratehub’s calculations show that someone with a variable rate mortgage at 4.45 per cent amortized over 25 years, who pays $3,458 per month, would see that drop to 4.2 per cent and $3,371 in
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