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Bank of Canada Drops Rate...How does this effect you?

 

 

 

 

The bank of Canada has dropped its rate down from 1% to 0.75%  The reason... to counter the effects of cheaper oil on economic growth and inflation and to try to prevent financial instability that could result from a vulnerable housing market

So what does this mean to you?

 On a consumer level, your bank’s Prime rate will likely follow the overnight rate. Prime rate has been sitting at 3.00% for 4.5 years now, but you’ll likely see it drop by 0.25% down to 2.75% soon. If that’s the case, any credit you currently have open that’s attached to Prime rate (variable mortgage, line of credit, etc.) would also so its interest rate go down by 0.25%. Here’s an example of how that would affect you.

Let’s say you’re one of the lucky Canadians who recently got a 5-year variable rate of just 2.15% (3.00% – 0.85%) – your rate would go down to 1.90%, if Prime dropped by 0.25%. If you bought a home for $450,000, put down 10% and amortized over 25 years, your current monthly mortgage payment is $1,786. If your rate dropped to 1.90%, however, your payment would go down to$1,736; that’s an extra $50 in your monthly budget ($600 saved annually).

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