Last week, the Bank of Canada dropped their overnight rate by 0.50% and lenders have been responding. Variable rate mortgages, line of credits and student loans are all impacted by the drop of prime rate, saving consumers in interest costs.
Here are some highlights since the last announcement:
Stress Test Changes Effective April 6, 2020 for all insured mortgages (less than 20% down payment), the rate used to qualify borrowers will now be the greater of the borrowers’ contract rate plus 2% or the weekly median five-year fixed rate plus 2%. This will result in buyers having slightly increased purchasing power.
Rates Decreasing With global concerns not only on the coronavirus but oil price declines and a weakened US economy the bond market has dropped as investors look for more secure investments. This drop in the bond market yield resulted in fixed rates decreasing as well as a drop to variable rates. This is great news if you are thinking of making a change that impacts your mortgage and it also means a lower qualifying rate with the upcoming stress test changes. It’s a great time to use the equity you have in your home for a debt consolidation to save you on unnecessary interest costs or look into refinancing your higher interest mortgage at the current low rates.
Consumer Confidence & Toilet Paper Despite the above, consumer confidence is getting lower as people are worried about the coronavirus. If you are looking for a bigger place to stash all that toilet paper, give your trusted mortgage professional a call to understand how this may look for your personal financial situation. Based on the anticipation that the prime rate will remain low and maybe go even lower now is a great time to review your borrowing needs and make any necessary changes. As we step into the busy spring/summer market the benefits of the recent rate changes and a drop to the stress test rate, it is the perfect time to be knowledgable with how a mortgage may look for you. If you would like to explore acquiring an investment property, buying a new home, or review your existing mortgage, reach out today. The next Bank of Canada Announcement is on April 15th, 2020.