Skip to content or main menu

1.866.702.7678
Edmonton: 780.702.7678 | Calgary: 403.536.0763

Bank of Canada Cuts Rate to 0.25%

April 20, 2009 by First Foundation

In a widely anticipated move the Bank of Canada further reduced it’s overnight lending rate to 0.25% – the lowest in Canadian history.

The more unexpected part of the announcement was the proclamation from the Bank of Canada that it would leave the overnight rate at this level until June of 2010. WOW. That means you have at least a year of lower variable and adjustable rates to enjoy before needing to lock-in.

Up until recently we have been strongly recommending fixed-rate mortgages to anyone that will listen (how can you lose at 3.69% for 5 years?) but this announcement may make variables and adjustable rate mortgages more intriguing for some…as long as you’re willing to lock-in to a fixed-rate by April or May 2010, when we would predict fixed rates to start moving up if we’re recovering by then.

What this effectively does is gives consumers more choice – between previously risky but now more appealing variable rates, and all-time low fixed rates.

It seems like a great time to explore your household finance needs and investment goals.

For more on this news, check out the Financial Post

p.s. If you’re already in a variable or adjustable rate mortgage, STAY IN IT until April or May 2010 then give us a call to see what to do.

Share |

Some comments...

  • Thanks for the update, that’s interesting news! Do you ever recommend 10-yr fixed rate anymore? If so, in what scenario?

    Bryan Smith (April 22, 2009)

  • Hi Bryan,

    Yes – the 10 year fixed can be very attractive to folks who want to “set it and forget it” to borrow from the TV ads…

    Right now the rate premium you pay for a 7 or 10 year term is a little steep when compared to a 5 year, so I’d probably recommend taking a 5 year right now. What you could do to simulate the 10 year rate, is get a 5 year fixed and increase the payments to match what you would have paid on a 10 year. That way it feels the same but your extra money is going to principal (you) instead of interest (the lender).

    G

    Gord McCallum (April 22, 2009)

  • This is very exciting news for those of us with a couple of variable rate loans. We’ve been enjoying the downward trend but waiting for the other shoe to drop; it’s nice that we have a little bit of a guarantee for a year here.

    David Hay (April 22, 2009)

  • Hey David,

    You’re right…

    Keep in mind that fixed rates will move in anticipation of a change to Bank of Canada policy and are linked to bond yields…so if you keep an eye on bond yields that can be a signal to “lock-in”.

    If you wait for the Bank of Canada announcement you’ll be too late. The fixed rates will already be up.

    Start to pay attention again next year around March or so and you’ll be glad you did.

    G

    Gord McCallum (April 22, 2009)

Add your own comment...

Blog Categories

← Back to Blog Home

Did You Know?