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Bank of Canada rate

madnezz

TRIBE Member
So they cut another 3/4 point today, making the BOC rate 1.5%, which is wild. Now let's see if the banks will follow... if they do, variable mortgages (like ours) are going to be practically free...


Bank of Canada chops borrowing costs to 50-year low - CBC

The Bank of Canada chopped a key interest rate by three-quarters of a percentage point on Tuesday as the central bank moves to combat economic weakness.

With the interest rate reduction — which was the biggest drop since one of a similar size in October 2001— the bank's overnight rate now stands at 1.5 per cent, a level not seen since 1958.

"While Canada's economy evolved largely as expected during the summer and early autumn, it is now entering a recession as a result of the weakness in global economic activity," the bank said.

"The recent declines in terms of trade, real income growth, and confidence are prompting more cautious behaviour by households and businesses."

Economists had been divided over whether the central bank would cut by one-half of a percentage point or go with a more aggresive reduction.

In the wake of the Bank of Canada's decision, the Canadian dollar was trading down 0.93 of a cent to 78.81 cents US.
 

Chris

Well-Known TRIBEr
Let's see how much banks pass the "savings" to the consumers, not much movement there. Only thing I have been seeing is reduced lending, tighter lending, and increasing interest rates amongst credit products.
 

madnezz

TRIBE Member
Well, so far they have followed suit, although reluctantly. I think our rates are as they should be based on past cuts. If this one gets passed on to the consumer, we're going to be saving several hundred a month...!
 

Eclectic

TRIBE Member
Can someone please explain how this affects Joe Sixpack?

i.e. Me

Thanks, I never get all this bank stuff.
 

Teflon

TRIBE Member
If you have a fixed rate mortgage nothing will happen.

Variable mortgage rates will be cut if the banks pass on the rate cut, which they should.

I know someone with a 3.75% variable rate. If they pass on the cut it should go to 3 or 3.25.

WOW
 

madnezz

TRIBE Member
Our two mortgages are variable and are currently 3.0% and 3.1%. If the rate cut gets passed on by the banks, we'll be down to 2.25 and 2.35.... :eek: If that actually happens, we could be saving nearly $500 a month!
 

Mrs. Pink

TRIBE Member
we'll see, i doubt if banks will be willing to cut rates again. it would be great for consumers, but i'm just not sure if banks will be inclined to cut rates again......hope they do, my virm mortgage is already below 3%.....be nice to have another cut.
 

kyfe

TRIBE Member
madnezz said:
Our two mortgages are variable and are currently 3.0% and 3.1%. If the rate cut gets passed on by the banks, we'll be down to 2.25 and 2.35.... :eek: If that actually happens, we could be saving nearly $500 a month!

That's a pretty sweet rate, I have a variable and we're locked in till April 09 (rate locks every 6 mths) @ 4% as our rate renewed on Oct 1 when the banks prime was 4.75. We've been ahead of the game over the past 4 years so i really cannot complain.

I'm trying to find a way to get the bank to drop it before April, but I'm not having much success.

any suggestions?
 

DJ Doublecross

TRIBE Member
justin surdit said:
When VRM's drop, try keeping your payments the same. Helps pay down the mortgage.
Yeah I thought the payments stayed the same no matter what? Or maybe I chose to set mine up that way, I forget.

If RBC agrees to cut a half point as well, I may consider locking in!
 

kuba

TRIBE Member
Drop what, their pants?

They can't unfortuantely. But moving forward while rates are rising yours will also be locked in.
 

kuba

TRIBE Member
DJ Doublecross said:
Yeah I thought the payments stayed the same no matter what? Or maybe I chose to set mine up that way, I forget.

If RBC agrees to cut a half point as well, I may consider locking in!
Locking into what? a 5 year fixed at 5.5% or so?

now that would be stupid.
 

DJ Doublecross

TRIBE Member
Isn't the fixed rate tied to Prime as well? If the lending rate is 3.5%, would fixed be as high as 5.5? I haven't looked into it.... my open variable rate is Prime -0.25%.
 

kyfe

TRIBE Member
kuba said:
Drop what, their pants?

They can't unfortuantely. But moving forward while rates are rising yours will also be locked in.

that's the way it's been explained to me. I'm now trying to use it as a point of leverage for future negotiations and to have them address the silly fees they charge for my direct investing account. hopfully I can get something more out of them. We are now in the open period of our mortgage so maybe there is another way?

BTW thanks again for hooking us up, you've saved D & I thousands.
 

madnezz

TRIBE Member
DJ Doublecross said:
Isn't the fixed rate tied to Prime as well? If the lending rate is 3.5%, would fixed be as high as 5.5? I haven't looked into it.... my open variable rate is Prime -0.25%.
The fixed rates are not tied to prime which is why they're whatever the banks want them to be.

Fixed rates have been going up and up while variables have been dropping.
 

kuba

TRIBE Member
kyfe, you are just a number, nothing more

If you had $M in assets, maybe they'd do it

but otherwise regular dudes like you and I don't matter and no, they won't get out of their agreement til april 09 (is that when your deal expires or when your rate freeze does?)
 

DJ Doublecross

TRIBE Member
madnezz said:
The fixed rates are not tied to prime which is why they're whatever the banks want them to be.

Fixed rates have been going up and up while variables have been dropping.
Ah that makes sense. For some reason I thought the fixed was still tied to prime (but Prime +% obviously) and whenever you lock in, you stay at that rate for the whole term. So if Prime became very low, you could lock in at a fairly low fixed rate. I suppose that wouldn't make much sense for the banks though.
 

kyfe

TRIBE Member
kuba said:
kyfe, you are just a number, nothing more

If you had $M in assets, maybe they'd do it

but otherwise regular dudes like you and I don't matter and no, they won't get out of their agreement til april 09 (is that when your deal expires or when your rate freeze does?)

I hear you but it can't hurt trying, I know the mortgage isn't going to change till April and that's cool because although I take a shortfall now I will make it up when it locks again so it's really good protection to have.

the freeze is up in April 09, the Mortgage in October 09 at which point I may consider locking in. It's far to early right now and if there's another drop in the new year I don't want to miss that benefit.

however I'm still suprised fixed rates are over 5%. once they hit 4% if it happens is when I'll give locking in a serious look.
 

kyfe

TRIBE Member
DJ Doublecross said:
Ah that makes sense. For some reason I thought the fixed was still tied to prime (but Prime +% obviously) and whenever you lock in, you stay at that rate for the whole term. So if Prime became very low, you could lock in at a fairly low fixed rate. I suppose that wouldn't make much sense for the banks though.

Rob, it's tied to the BANKS prime lending rate which as someone said is usually a point or two higher than the bank of Canada, or at least that's my understanding of it.
 
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