Bank of Canada cut starts to nudge mortgage rates down

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The big interest rate headline of the week comes from the Bank of Canada. Its quarter-percentage point cut on Wednesday was the first cut since the days of the toilet paper panic buying in March 2020.

The decline translates into lower interest rates on adjustable-rate mortgages and lines of credit. Depending on the loan type, interest rate and repayment, most adjustable-rate borrowers can see a reduction in monthly payments, or interest costs, of $12 to $21 for every $100,000 of balance.

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The new affordability brought about by interest rates – and try not to snicker at the word “affordability” – should lead to more home purchases. In fact, it could turn expectations into a self-fulfilling prophecy that supports home prices.

However, given the weakening economy, further interest rate cuts will be necessary to continue to fulfill the “prophecy”.

As for interest rates, insured and uninsured variable rates fell 19 and 25 basis points, respectively, at national lenders this week.
Insured variables are currently at 5.65 percent at Nesto. Uninsured variables may require a further reduction in the BoC rate before falling below 6 percent.

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Fixed rates are also on the move, with bond yields falling as markets expect further easing from the BoC. That should lead to some of the leading domestic fixed rates falling by next week.

Regionally, some online brokers (e.g. Butler Mortgage) have already dropped rates to 4.49 percent on insured 5-year mortgages, the lowest level in about a year.

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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