The Bank of Canada (BoC) announced their overnight rate cut to 0.50% last week, in anticipation of stimulating the economy, through encouraging more consumer borrowing. As a result from a consumer’s point of view, many are hoping for better interest rates on their mortgage financing and lines of credit. With the overnight rate at 0.50% at present, the cost of borrowing is at significantly lower, consumers are receiving only a fraction of these savings.
Previously prior to the financial crisis in 2008, major banks passed on any savings due to reductions in rates, to their consumers. However, this was not the case with the most recent rate cut which was announced in by the BoC, in January 2015. Although banks did lower their prime lending rates slightly, majority of savings were pocketed by the bank themselves.
Once again last week we did see a few major banks announce marginally lower prime lending rates, in response to the rate cut announcement and it does not appear that these major banks will be passing on all the savings to consumers. While it is profitable for major banks to pass on a small portion of rate savings to their consumers, this also seems to be the continuing trend since the last quarter!
An informative article of an interview with Calum Ross was published by CBC News.
Are looking to get a mortgage and would like to find out how these lower rates would apply to you? Contact the MiMortgage.ca team now to speak to an expert or to get pre-approved, apply now through our secure website.