July Mortgage Update - What ACTUALLY happens with a rate decrease
Hope your summer is off to a great start!
I read a lot of bad information out there on social media when the Bank of Canada cut rates in June, so I thought I'd share what a rate cut actually means to you depending on what mortgage product you are either in, or pre-approved for.
1) Most Bank Variable Rate Mortgages (TD, RBC, BMO, CIBC, etc.)
The payment will not change.
You will be paying more towards the principal, and less interest.
If you are shopping with a pre-approval the buying power slightly increases because the payment is not set yet.
*Note: At the bank's discretion the payment can be reduced if you call in or visit the bank, and the mortgage remains on track of the original amortization. This is rare these days, so most people will be stuck with the current payment.
2) Adjustable Rate Mortgages (Scotia, First National, MCAP, RMG)
The payments will go down.
If you are shopping with a pre-approval, the buying power slightly increases because the payment is not set yet.
3) Fixed Rate Mortgages
Nothing happens! (*at least right away)
Fixed rates are controlled by the bond market. While BoC decisions do influence bonds, it can take time... Remember that bond pricing generally is a reflection of where rates are going, so it's more of an indication of what the BoC is going to do.
Questions? I hope this clears up the misinformation out there!
Have a terrific July, and let's hope for another drop soon.
Credits and thank you to Jim Steffler for this information. If you’re looking for a great mortgage agent, consider reaching out to Jim!
Jim Steffler
Mortgage Agent Level 2
Dominion Lending Centres National Ltd.
TEL: 226-338-5136
EMAIL: jim@jimstefflermortgages.com
https://jimstefflermortgages.com