Bank of Canada cuts key rate by 0.25%

[Slava]

Have any of the mortgage providers announced cuts for their variable rate programs or has it shown anywhere at this point?

[MillerTime GFG]

I have heard all sorts of different things from the lenders. From no movement at all, to some saying they will most likely be making a move. Nothing official yet though.

[Mortgage Made Easy]

Originally Posted by Slava

Have any of the mortgage providers announced cuts for their variable rate programs or has it shown anywhere at this point?

No change as of yet! It appears that Prime may not change from 3.00% at this point... per previous post regarding TD's announcement. It now sounds like a wait and see... we will hear more tomorrow if others consider a change.

The discounts may change... nothing yet. Too early...

[MillerTime GFG]

Originally Posted by Yappin Tappin

Hey guys,

With this drop in the interest rate, I was wondering what some of your thoughts are on going for a fixed rate for a mortgage? I know the common thought process is over the long run a variable rate is the better way to go, but with the rate being so low now would choosing a fixed rate be a smart move or would variable still be better?

Also, do you think now would be a good time to purchase my first home or should I wait a bit more? I've read a few articles after the oil prices dropped saying they expect housing prices will stay roughly the same in Alberta this year. I currently would be close to affording 20% down for a house around 400-450k, so should I strike soon?

Sorry, I'm not the most knowledgeable when it comes this stuff so I'd love to hear everyone's thoughts.

Thanks!

You really can't go wrong with a fixed rate these days with them being historically low. I do however think there is still good value in a variable rate, as they're also extremely low and could potentially survive a few prime rate hikes and still out-perform current 5 year fixed rates. It really depends on where you're comfortable. If you like the peace of mind knowing your interest rate and payment will not change for your full term, then go with a fixed. If you're OK going to sleep at night knowing your interest rate and payment could change tomorrow (and you can handle it financially), then a variable mortgage may be right for you.

As for when to buy, it's pretty tough to say. There is lots of inventory, but not as many sales. Leads me to believe there needs to be an adjustment of some sort, and I think there will be a small one. If you're OK hanging tight for a little while, then it may not be a bad idea.

[Jbo]

As a lender, I can say the first reaction at work today, as well as expected in the industry/other lenders is for Prime rate to remain where it is. Unlikely to see any change there.

[Slava]

I'm pretty sure that the Bank of Canada didn't cut the rate so that the banks could earn an extra quarter point on their variable loans...

[Jbo]

Prime rate may eventually drop due to pressure from BoC, overnight rate and consumers...but immediate reaction was prime cut would not be coming...as TD said in its press release, there are more factors going on then just the overnight rate....just passing on industry scuttlebutt

[Slava]

No, and I was meaning to take a shot at you at all. I understand that there is more to the prime rate than the BoC overnight. I am just interested to see who cuts rates on their savings accounts (HISA) and doesn't for borrowers.

[MillerTime GFG]

Decent read here:

https://ca.finance.yahoo.com/news/ba...090010316.html

Poloz also sought to ease potential public fears when asked whether the rate cut signals he's worried about the health of the economy. He said he wouldn't put it quite that way.
"That doesn't mean that there's a really bad thing, or a drastic thing, happening here," Poloz said of the rate reduction.
"For us, it's a more a matter of repositioning the economy in such a way that it fires on all cylinders."

[Red]

He should just come out and say the truth that this move was made to lower the servicing cost of Canada's debt so Harper could deliver the balanced budget he promised. Fall elections, Harper doesn't want bad news before that.

Political move first and foremost.

[robaur]

If the Bank of Canada had increased their rate by 0.25% -- TD would have been the first to announce that they have increased the prime rate to follow the Bank of Canada.

But since the Bank of Canada has decreased the rate, the prime will stay right where it is allowing the banks to profit that extra 0.25% until the consumers get angry or the Bank of Canada forces them to cut the prime. Not a single major bank will "step out of line: and drop their prime rate....these banks are like a band of brothers.

Greedy scum. Banks will never change.

[robaur]

Originally Posted by Jbo

Prime rate may eventually drop due to pressure from BoC, overnight rate and consumers...but immediate reaction was prime cut would not be coming...as TD said in its press release, there are more factors going on then just the overnight rate....just passing on industry scuttlebutt

You know what TD said in its press release is complete and utter dog piss combined with a heavy pile of horse ####.

What other factors are going on that are preventing them from dropping the prime rate? If they were so important then why was there not an additional explanation or press release detailing these incredibly important factors.

It's just lip service from the banking industry and a chance to protect their bottom line earnings.

[Flamenspiel]

^^TD is one bank, and they have always been very conservative in their lending practices. I remember when I bought my first house in the mid 90s. TD wanted me to sell my car despite the fact that I had a good salary, no kids and good credit. The other banks lined up for my business.

[Mortgage Made Easy]

It is still too early to tell if the other Banks are going to consider the 0.25% cut to Prime. At the moment, they are probably watching oil, CDN dollar and markets to determine if and when they may consider a change to Prime.

Typically RBC leads the pack...

[Street Pharmacist]

Originally Posted by robaur

If the Bank of Canada had increased their rate by 0.25% -- TD would have been the first to announce that they have increased the prime rate to follow the Bank of Canada.

But since the Bank of Canada has decreased the rate, the prime will stay right where it is allowing the banks to profit that extra 0.25% until the consumers get angry or the Bank of Canada forces them to cut the prime. Not a single major bank will "step out of line: and drop their prime rate....these banks are like a band of brothers.

Greedy scum. Banks will never change.

Originally Posted by robaur

You know what TD said in its press release is complete and utter dog piss combined with a heavy pile of horse ####.

What other factors are going on that are preventing them from dropping the prime rate? If they were so important then why was there not an additional explanation or press release detailing these incredibly important factors.

It's just lip service from the banking industry and a chance to protect their bottom line earnings.

Why is protecting their bottom line a bad thing? Canadians hate business I think

It's a free market. If banks could make more money by lowering the rate and selling more loams, they would. If it doesn't, should they do it out of kindness? I'm confused how that makes them evil. There's lots of other reasons, but this one seems fine to me

[Drummer]

I heard on the 660 News business report that rates might be dropped another quarter point at the next rate announcement in March. What a complete 180 from a year ago when interest rates were sure to drop.

[Slava]

Originally Posted by Mortgage Made Easy

It is still too early to tell if the other Banks are going to consider the 0.25% cut to Prime. At the moment, they are probably watching oil, CDN dollar and markets to determine if and when they may consider a change to Prime.

Typically RBC leads the pack...

That's all well and good that they're "watching" these other factors, but the fact of the matter is that they have little or nothing to do with the setting of the prime rate. The overnight rate just dropped and made it cheaper for the banks to borrow. The central bank made this cut specifically because they were concerned about inflation and IMO the banks should do the right thing and follow suit. I absolutely agree that if the overnight rate had risen a quarter point it would've been followed by all of these institutions that same morning. There wouldn't be the deliberation that this move apparently requires.

Originally Posted by Drummer

I heard on the 660 News business report that rates might be dropped another quarter point at the next rate announcement in March. What a complete 180 from a year ago when interest rates were sure to drop.

I think that you meant sure to rise? But ya, a huge turnaround. Just goes to show that you can't predict these things at all!

[Jbo]

Originally Posted by robaur

You know what TD said in its press release is complete and utter dog piss combined with a heavy pile of horse ####.

What other factors are going on that are preventing them from dropping the prime rate? If they were so important then why was there not an additional explanation or press release detailing these incredibly important factors.

It's just lip service from the banking industry and a chance to protect their bottom line earnings.

I don't work for TD, but you sure seem to have a bone to pick with the Banking industry.

I'm not sure what line of work you are in, but I will say Banks are in the business to make money. We have shareholders that demand profitability.

None of this has to do with BoC cutting the overnight rate, but you seem angry at a more fundamental level. I'm just curious are banks supposed to operate at a loss or breakeven level? How long do you think that would last? If you want to be more of a member and share in all that, there are credit unions you may find more to your liking. But then you are probably going to want them to be profitable right?

This post is not to defend from a soapbox, but I could throw stuff back at you. Are you equally as outraged that airlines haven't dropped flight prices despite lower fuel costs?

[Jbo]

Originally Posted by Slava

That's all well and good that they're "watching" these other factors, but the fact of the matter is that they have little or nothing to do with the setting of the prime rate. The overnight rate just dropped and made it cheaper for the banks to borrow. The central bank made this cut specifically because they were concerned about inflation and IMO the banks should do the right thing and follow suit. I absolutely agree that if the overnight rate had risen a quarter point it would've been followed by all of these institutions that same morning. There wouldn't be the deliberation that this move apparently requires.



I think that you meant sure to rise? But ya, a huge turnaround. Just goes to show that you can't predict these things at all!

There will be pressure to drop, but will be interesting how soon/if it happens.

[kevman]

Originally Posted by Slava

I absolutely agree that if the overnight rate had risen a quarter point it would've been followed by all of these institutions that same morning. There wouldn't be the deliberation that this move apparently requires.

When the BOC rate changed on September 8, 2010 to 1% it took all of a day for TD and Scotiabank to up their prime rate to 3% on September 9, 2010...