- Today, the Bank of Canada announced a reduction of its overnight rate by 25 basis points, bringing it down to 4.5%. Concurrently, prime rate also dropped to 6.7%. This move is expected to have significant implications for borrowers with adjustable rate mortgages and Home Equity Lines of Credit (HELOCs).
- Adjustable Rate Mortgages (ARMs): Borrowers with ARMs will benefit from lower monthly payments. For every $100,000 borrowed, the payment is projected to decrease by approximately $15. Thus, for a $400,000 mortgage, borrowers can anticipate a reduction of around $60 on their upcoming monthly payments.
- Home Equity Lines of Credit (HELOCs): HELOC holders will similarly see their monthly payments decrease. For every $100,000 borrowed through a HELOC, the payment is expected to decrease by about $20. Therefore, a HELOC balance of $400,000 will likely result in a payment reduction of approximately $80 per month.
- Static Payment Variables: Borrowers with static payment variables will not experience a decrease in their monthly payments. However, their payments will begin to allocate slightly more towards principal and less towards interest, reflecting the lower prime rate.
- Future Financial Adjustments: With the reduction in the overnight rate and prime rate, borrowers are encouraged to review their financial strategies and consult with financial advisors to leverage these changes effectively.
This adjustment by the Bank of Canada aims to stimulate economic activity by making borrowing more affordable for consumers. Borrowers are advised to stay informed about any further developments and how they may impact their financial situations.
For any inquiries regarding mortgages or financial advice, please feel free to reach out.
Craig Van Dolder – 519 372 8524
craig@vandoldermortgages.com