Given the recent cuts by the Bank of Canada (BoC) to their trendsetting lending rates and the very real possibility that very financial institution that sets the foundation for the mortgage rates which eventually trickle down to consumers could cut those numbers again in March, we thought it was time to write something about what it all means and supply something of a mortgage rate forecast in these interesting times.
Although many of the pundits were shocked when they first heard of the BoC cut that lowered the rate from 1% to .75%, the reason for the move that was generally seen as a preemptive measure to guard against economic hard times was tied to falling oil prices and therefore understandable and a little worrisome.
However, that’s the point where the lending institutions get involved and set their rates based on the federal numbers. This is the juncture consumers need to watch carefully because the relationship between these two rates usually follows a pattern whereby the they go up and down in unison, but that’s not necessarily the case.
Remember, when you read the news about how the banks are dragging their feet about lowering the rates in lockstep with the BoC numbers, that doesn’t mean there aren’t good deals to be had. For example, recently the prime rate fell from 3% to 2.85% which is a number that represents a savings to consumers although it’s not equal to the percentage of the original BoC rate cut.
The bottom line is that while there’s another drop in the not too distant future as far as mortgage rates forecasts go, consumers are getting some real benefits with the current reductions even if the commercial banks are being dragged along unwillingly.
