🏡💰 If banks adjust their prime rates downward following a Bank of Canada rate cut, here's how it affects your mortgage:
Variable-Rate Mortgages:
Immediate Impact: Borrowers with variable-rate mortgages will see an immediate reduction in their interest rates and monthly payments, similar to how they've experienced increases with rising rates.
Monthly Savings: Lower prime rates mean lower interest costs, resulting in more manageable monthly payments.
Fixed-Rate Mortgages:
No Immediate Change: Those with fixed-rate mortgages won't see any change in their payments until it's time to renew their loans.
Renewal Rates: At renewal, the new fixed rate will be influenced by current bond market conditions, which are affected by overall investor confidence and Bank of Canada rate decisions.
Fixed-Mortgage Rates:
Bond Market Influence: Fixed-mortgage rates are tied to the bond market. While the Bank of Canada's decisions impact these rates, they are primarily driven by investor confidence.
Market Expectations: The bond market often anticipates rate cuts, so if a cut was expected, it may already be factored into current fixed rates.
Understanding these effects can help you plan your mortgage strategy and manage your finances better. 🏡📉
