Bank of Canada Cuts Rates Again — Here’s How It Affects You

Yesterday, the Bank of Canada reduced its policy interest rate by 25 basis points, bringing it down to 3.00%. This marks the sixth consecutive rate cut and is expected to lower the prime rate, which directly affects variable-rate mortgages, personal loans, and lines of credit.

Anticipated Changes in Prime Rates:

• Variable-Rate Mortgages: Borrowers with variable-rate mortgages may soon experience a reduction in interest expenses. For those with fixed payments, a larger portion will now be allocated toward the principal balance. If your payments fluctuate with the prime rate, you can expect a decrease of approximately $14 per $100,000 of mortgage debt (based on a 25-year amortization).
• Fixed-Rate Mortgages: There will be no immediate effect on payments for individuals holding fixed-rate mortgages.
• Other Loans Linked to Prime Rate: Interest charges on personal loans and lines of credit tied to the prime rate are also expected to decrease.

With the next Bank of Canada rate announcement scheduled for March 12, 2025, market watchers will be keeping a close eye on inflation trends, employment data, and global economic conditions. Whether this is the last rate cut or more reductions are ahead will depend on how the economy responds in the coming weeks.

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