In a surprising move today, the Bank of Canada stated that it would leave the overnight rate at .25% until June 2010 to flatten the yield curve. This is great news for variable rate mortgage holders. It's not often the Bank of Canada states they plan to hold a rate for an extended period of time! More than ever, this is the time of Best Rate Mortgages
We expect the Prime Lending Rate to follow and come down shortly to an historical low of 2.25%. For those fortunate enough in variable rate mortgages prior November 2008 when the variable rate was between Prime minus .50 and .90 you would currently be paying 1.35% interest on your mortgage today!
Fixed rate mortgages have also been very attractive lowering consistently these past few months. The very best fixed 5 -Year Rate currently sits at 3.69%! And while some conditions do apply on this exceptional rate, the main point here is that.... rates are LOW!
To put it in perspective, 1 year ago the 5-Year Rate was hovering at 5.39%. If you had a $300,000 mortgage your payments would have been $1812.01 (based on a 25 yr amt). Based on the lowest 5-Year Rate today, the payment would be $1528.05. A savings of $283.96. Doesn't sound like much? Try a savings of $17K over the 5-Year term.
Another way of looking at it.... the difference in rates from 1 year ago has increased your borrowing power by $49,000! You can now afford almost $50K more home simply in the difference in rates!
Other notes of interest:
· The Bank also downgraded its economic forecasts for both 2009 and 2010.
· The comments on policy alternatives did not include much detail, but they opened the door to quantitative easing and we expect more on that front when the Bank releases the Monetary Policy Report on Thursday.
