On July 17, 2015, the Bank of Canada reduced the overnight lending rate from 0.75% to 0.50%. This is the second Bank of Canada reduction in 2015.
In the 80 year period (1935-2015), The Bank of Canada rate has never been lower than 0.50% and has matched this level only once previously - the 14 month period of April 2009 through May 2010.
What does this mean for the home buyer?
The Canadian chartered banks this week have lower their prime lending rate to ~ 2.79% ~ 2.85% for a 5 year fixed term mortgage (varies slightly by bank). Any reduction in interest rate will save the typical home buyer over the course of their mortgage. Additional savings can be realized with shorter term or variable mortgage.
While it is unknown what the future will bring, these record low interest rates make a home purchase more attractive to many home buyers. For a given principle amount borrowed, these low rates allow a reduction in monthly payments or reduce the time required to fully pay off a mortgage.
If you are interested in finding out what this mortgage rate reduction means to you and an anticipated home purchase, I can put you in contact with a mortgage broker that can assist you in the analysis.