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At the time of writing, derivatives markets suggest an 80 percent chance that the Bank of Canada will cut its benchmark interest rate by 25 basis points on Wednesday, according to Refinitiv Eikon. This would bring the benchmark rate down to 6.95 percent, marking the first decline since the pandemic-induced free fall.
While the Bank of Canada may still delay its easing measures until July 24 to keep an eye on the two inflation reports before that meeting, one thing is certain: lower variable interest rates are coming.
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As soon as the central bank pulls the lever, the variable mortgage fan club will gain new members. One thing is important for supporters of the variable mortgage: There are two variants to choose from:
- Fixed-payment, adjustable-rate mortgages: Your payment does not change when the prime rate falls; instead, you pay more principal and less interest.
- Adjustable-rate mortgages: Your payment decreases when your lender's prime rate falls.
New borrowers seeking payment relief will increasingly choose the latter option in the hope of freeing up cash flow through falling interest rates.
Robert McLister is a mortgage strategist, rates analyst, and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.
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