Bank of Canada cuts Interest Rates again. Prime now at 2.25% - Calgarypuck Forums - The Unofficial Calgary Flames Fan Community

Bertuzzied · 04-21-2009, 08:58 AM

I think this must be the lowest rate ever. Heloc holders and variable rate mortgagors rejoice!

Hmmmm How lowww can we gooooo?? 1%???

Well golly gee, that is nice of BMO to pass the 1/4% cut to their clients... AFTER they increased all their existing customers by 1%!

http://money.canoe.ca/News/Economy/2...187621-cp.html

The bank said it will target a daily level of settlement balance in the financial system at $3 billion, a move it says will help drive the overnight rate to the bottom of the trading band.
The Bank of Montreal (TSX:BMO) was the first of Canada's major banks to announce that it would lower its own prime rate in step with the central bank, dropping the benchmark around which it calculates variable mortgages and other loans to 2.25 per cent.
Shortly after, Royal Bank (TSX:RY) said it too would lower its prime rate to 2.25 per cent, signalling that the other chartered banks would likely follow suit.

Mike Oxlong · 04-21-2009, 09:04 AM

Wow. I am surprised that they dropped again. The Bank of Canada overnight rate is now at .25%. They can only drop it once more and then they have hit absolute rock bottom. I don't know if they can even go to 0%.

In one of the articles I was reading it said they are planning to leave it there until at least mid 2010. Variable rate holders can rejoice for a while it looks like.

Jedi Ninja · 04-21-2009, 09:20 AM

Quote:

Originally Posted by Mike Oxlong

Wow. I am surprised that they dropped again. The Bank of Canada overnight rate is now at .25%. They can only drop it once more and then they have hit absolute rock bottom. I don't know if they can even go to 0%.

In one of the articles I was reading it said they are planning to leave it there until at least mid 2010. Variable rate holders can rejoice for a while it looks like.

There has been some talk about the possibility of the fed engineering negative real interest rates by setting the key lending rate near 0 and then engineering inflation of a few percentage points by increasing the money supply.

Shazam · 04-21-2009, 09:23 AM

Quantitative easing, here we come! Whoo whoo!

Bertuzzied · 04-21-2009, 09:27 AM

Hey is CP slow as vandemeer today? or is it only me?

Get this. I was talking to my friend with BMO and he said that in order to get his HELOC back to prime he has to reapply when the economy gets better! hahaha. How is BMO going to determine that? He didn't have to apply when they raised his existing heloc by 1%.

Boblobla · 04-21-2009, 09:32 AM

Quote:

Originally Posted by Mike Oxlong

Wow. I am surprised that they dropped again. The Bank of Canada overnight rate is now at .25%. They can only drop it once more and then they have hit absolute rock bottom. I don't know if they can even go to 0%.

In one of the articles I was reading it said they are planning to leave it there until at least mid 2010. Variable rate holders can rejoice for a while it looks like.

Does this mean I will be able to get an even lower percentage on my mortgage?

Old Yeller · 04-21-2009, 10:06 AM

I'm on a variable rate mortgage but I pay a flat rate every month in which the extra is applied directly to the principle.

If this does stay this way until sometime in 2010 I'll be paying 3 to 4 years off my mortgage in the next year and a half.

Shazam · 04-21-2009, 10:19 AM

Yeah, same thing happened to me when I had a variable mortgage. Chopped four years off due to it.

Resolute 14 · 04-21-2009, 10:25 AM

I wish I had gone with variable rate... at least I can fix that in December.

Russic · 04-21-2009, 11:45 AM

Hey people who know a lot more about money than I do! If I have extra money and a variable rate mortgage should I be continuing to throw money into RRSP's or should I start deflecting some of that towards my house?

DementedReality · 04-21-2009, 11:55 AM

Quote:

Originally Posted by Russic

Hey people who know a lot more about money than I do! If I have extra money and a variable rate mortgage should I be continuing to throw money into RRSP's or should I start deflecting some of that towards my house?

in theory, if you can get a better return by investing, that would be more effecient use of your money then paying off a low interest loan.

however, paying the mortgage is a guarateed tax free return. of course it comes down to your own investment and financial goals which is why it helps to have a consultant work with you.

there is also the method where yo can do both! invest in the RRSP and put the tax return from the RRSP onto your mortgage.

Mike Oxlong · 04-21-2009, 12:05 PM

The only warning I have for people who want to get into variable rate mortgages now is this. Right now banks are offering variable rate mortgages at Prime plus .8%. So effectively you would be paying 3.05% which is great. However as we were discussing this is virtually as low as rates are going to get. They pretty much have no where to go but up from here. It might take a while for them to start to climb but once they do when you are in a Prime plus .8% situation they can get expensive really quick.

You can generally lock in whenever you want with a variable but by the time the rates start climbing the fixed rates that you can lock into could also potentially be a lot higher than they are now as well. You could miss out locking in for 5 years at under 4%.

People who have been in variable rate for 8 months or longer likey have a Prime LESS .6% or something similar. They are in a far better position obviously. Not only because they are paying 1.65% right now but with a variable rate at less than Prime it really doesn't hurt them as quickly when rates to start to rise again.

Mike Oxlong · 04-21-2009, 12:07 PM

Quote:

Originally Posted by Boblobla

Does this mean I will be able to get an even lower percentage on my mortgage?

If we go with Variable then yes.

Fixed rates might even drop a bit more in the next couple of days as well. When the Bank of Canada drops rates it only affects the variable rates directly. Fixed rates are based on bond yields.

Fixed rates did drop though the last few times the Bank of Canada lowered so we may see some even better deal coming up.

Bertuzzied · 04-21-2009, 12:30 PM

My mort broker has a 5 year listed at 3.69%. Still not low enough for me to consider locking it in.

DementedReality · 04-21-2009, 12:37 PM

Quote:

Originally Posted by Bertuzzied

My mort broker has a 5 year listed at 3.69%. Still not low enough for me to consider locking it in.

thats a pretty tempting rate ... how long until inflation causes rates to rise above 5%? i think the chances are pretty high as 5% is still a pretty low rate and there is so much room to go higher. yes this rate is going to be maintained unill Q2 2010, but lots can happen in 5 years and i think its a pretty safe bet that rates are only to go up in the mid term future.

if i was working, i would consider locking in at anything under 3.7.