As many experts predicted, Bank of Canada announced this morning that it is cutting its key rate another .25 per cent to .5. Bank of Canada Governor Stephen Poloz cited concerns about oil prices and other commodities, as well as disappointing global growth. He stopped short of calling the current economic conditions a recession as some economists have said and instead called it was a “mild contraction.”
Fixed mortgage rates fell in January after the last BoC rate cut, but this doesn’t mean the full discount will be passed on to the consumer. In the aftermath of this announcement, I expect to see more variable rate mortgages, which could entice some prospective buyers who are on the fence to finally enter the real estate market. The loonie also fell one cent today, reaching its lowest point since March 2009, and if it keeps dropping that will also have a downward impact on fixed rate mortgages. So far, I haven’t seen any on the posted rate being lowered or even what prime will be for consumers following BoC’s rate announcement. TD has announced that it will lower its prime rate to 2.75 per cent, down a tenth of a per cent compared to BoC’s sharper rate cut, but I have not seen what other banks plan to do.