According to the Financial Post, Canadian consumers borrowing for a home might be looking at the lowest rates in the country’s history as a result of the Bank of Canada’s rate cut on Wednesday.
With the average discount on a variable rate product 75 basis points, that means a 2% rate if banks move their prime rate to 2.75% from 3%. Based on the lowest variable available Wednesday, the 25-point reduction would result in a 1.80% rate.
One benefit of the cut could be that Canadians will use the lower interest payments to pay down principal faster, said Benjamin Tal, deputy chief economist with Canadian Imperial Bank of Commerce. “We have seen before when people leave their payments unchanged but more of it will go to principal,”
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