Bank of Canada Reduces Key Interest Rate
The Bank of Canada announced last month that it is reducing its key interest rate by a quarter point.
As a result of sharp declines in Canada’s stock market and the increasing fears over the state of the US economy motivated the Bank of Canada to cut its key interest rate on Tuesday for the second consecutive month.
The bank reduced its overnight lending rate from 4.25% to 4% in the hopes of minimizing the effects of a potential US recession. In December, the Bank of Canada cut its benchmark rate by a quarter point, marking the first reduction in more than three years.
The Bank of Canada indicated that additional rate cuts were likely to come soon.
“Further monetary stimulus is likely to be required in the near term to keep aggregate supply and demand in balance and to return inflation to target over the medium term,” the bank said in a statement.
Following the Bank of Canada announcement, chartered banks quickly decreased their prime lending rates by a quarter of a percentage point to 6%, effective Wednesday.
This interest rate cut means cheaper borrowing costs for Canadians with variable rate mortgages, lines of credit, and other loans with floating rates. However, fixed-rate mortgages are not likely to be affected directly as their rates are influenced primarily by movements in the bond market and not the Bank of Canada’s overnight rate.
Rates on fixed mortgages have been fairly steady recently. Even so, mortgage shoppers can’t go wrong with a mortgage pre-approval with a rate hold. If rates drop, you’ll benefit from the new, lower rate. If rates on fixed mortgages rise during the rate hold period, you will still have your original lower rate.
In an ever-shifting interest rate environment having an optimal mortgage strategy is crucial, a mortgage broker can advise you on how to get the most from your mortgage financing.
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