*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[GGG]

The other thing to keep in mind is 4% is the non-inflation adjusted return from the mortgage. In real dollars that more like 1.5%. Compare that to an average 6% real return from the market and you look pretty good. But you need to add tax say 12.5% - 25% on the uninflated return. So 8.5% ror at 2.25% tax is 6.25 and only 3.75 after inflation. So 1.5 vs 3.75 and better if you can have lower taxes at time of selling the investment. But if you consider CAPE ratios to product real rates of return over the next 10 years it suggests you might see only 3% real rates of return from the market. In that scenario your after tax real return is only 1.625% or perhaps 2.3% if more tax efficient.

At that point you might as well take the guaranteed return.

So all that said you will have lower volatility if you pay of your mortgage but a higher expectation value if you invest. If you are in the 10 year window of retirement I’d lean pay it off. If longer you probably can ride out volitility and be better off investing.

So I will be paying mine off once my rate expires.

[greyshep]

Originally Posted by Iggy_12

Possibly a dumb question, but how do rate cuts typically impact fixed mortgage rates. like what does a .25 or .50 do to the rate if anything at all? if mortgage rates are 4% now what would you expect them to be after this cut?

I dont think you will see a fixed rate change happen quickly when the prime rate gets lowered. I believe those fixed rates are more tied to the bond market.

[Reaper]

Originally Posted by greyshep

I dont think you will see a fixed rate change happen quickly when the prime rate gets lowered. I believe those fixed rates are more tied to the bond market.

Our offered fixed rate did not change from 3.99% when there was a 0.5% drop in October. If we hadn't renewed I'm not sure it would have moved much lower if at all.

[The Fonz]

Originally Posted by Reaper

Our offered fixed rate did not change from 3.99% when there was a 0.5% drop in October. If we hadn't renewed I'm not sure it would have moved much lower if at all.

What term did that 3.99% fixed offer have on it, if you don't mind answering

[Reaper]

Originally Posted by The Fonz

What term did that 3.99% fixed offer have on it, if you don't mind answering

It was a three year term.

[blankall]

Originally Posted by Reaper

Our offered fixed rate did not change from 3.99% when there was a 0.5% drop in October. If we hadn't renewed I'm not sure it would have moved much lower if at all.

Fixed rates don't react instantly to interest rate changes, and instead are determined by the bond market. The bond market is more about where the market is expected to go. The current drops were already built into the bond market and projected pretty far out. Once the current round of cuts happens, the bond markets will readjust based on where things stand after the cuts.

In April, if the Canadian economy is still in the dumps and inflation is under control, I'd expect to see fixed rates fall again.

[kevman]

I'm still waiting to get those 20 bps back from the banks. Are bank primes ever going to go back to +2% over BOC rate?

[bizaro86]

Originally Posted by kevman

I'm still waiting to get those 20 bps back from the banks. Are bank primes ever going to go back to +2% over BOC rate?

Hahahahahahahahaha.... oh wait - were you serious!??!

[Slava]

Originally Posted by blankall

Fixed rates don't react instantly to interest rate changes, and instead are determined by the bond market. The bond market is more about where the market is expected to go. The current drops were already built into the bond market and projected pretty far out. Once the current round of cuts happens, the bond markets will readjust based on where things stand after the cuts.

In April, if the Canadian economy is still in the dumps and inflation is under control, I'd expect to see fixed rates fall again.

The most surprising thing to me is the GIC rates. I don't know how long they'll last, but you can still get a one year over 4% today, whereas the high-interest vehicles have all cut (as far I can see). I'd have thought they'd come down again overnight, but we'll see tomorrow.

[Johnny199r]

The CAD is now down to 69 cents, American.

[blankall]

Originally Posted by Johnny199r

The CAD is now down to 69 cents, American.

The US just announced their own rate cut. Could hopefully cause the CAD to recover?

[Fuzz]

Originally Posted by Johnny199r

The CAD is now down to 69 cents, American.

Errr, nice?

[chemgear]

The Plan is working! It's WORKING!

https://twitter.com/user/status/1836037648487415991

[blankall]

Originally Posted by chemgear

The Plan is working! It's WORKING!

https://twitter.com/user/status/1836037648487415991

I mean I guess the knee jerk reaction of increasing interest rates a whole bunch, after you decreased them to historically low rates, is going to stop inflation....so is having an economy in the dumps with awful per capita productivity. When people don't have jobs they can't spend money?

[Johnny199r]

Over the last 41 months CAD is down 17% vs US$, 12% vs Mexican Peso, 3.3% against the Chinese CNY, 5.5% against the British pound and 2% against the Euro.

[GGG]

Originally Posted by Johnny199r

Over the last 41 months CAD is down 17% vs US$, 12% vs Mexican Peso, 3.3% against the Chinese CNY, 5.5% against the British pound and 2% against the Euro.

Outside of Mexico and the US you’d say those are within the normal fluctuations

Like if you go back 48 months instead of 41 (why June 21 as a cut off) the dollar is up on the euro.

[opendoor]

And that 41 month window is pretty unrepresentative for the peso as well. Over the last 5 years the CAD is only down 2.1% against the peso and in the last year it's up 10.2%. The peso just had a big temporary drop against basically every currency once COVID started because it killed tourism. So if you use anywhere in 2020 or 2021 as the baseline, then basically all currencies have dropped against it. But that was just a temporary blip before it returned to its more normal range.

[Twitchy15]

Originally Posted by Reaper

It was a three year term.

pretty good! I did a 3 year 5.18 in like april... my choice was fixed 100$ increase of go variable and pay 300-350$ more a month. At that time I knew it would go down but unsure how fast.. looks like I made the wrong choice but it was a small increase at least.

[blankall]

Originally Posted by Twitchy15

pretty good! I did a 3 year 5.18 in like april... my choice was fixed 100$ increase of go variable and pay 300-350$ more a month. At that time I knew it would go down but unsure how fast.. looks like I made the wrong choice but it was a small increase at least.

You did alright. I know people who took out million dollar mortgages at 1.4% variable and were paying over 6% later.

[blender]

Ive always wondered why so many people took variable rates at rock bottom.
I know one guy who went the other way and locked in for 10 years low 3s four years ago. Seems smarter.