How Recent Bank of Canada Rate Cuts Impact Your Mortgage: What Homeowners and Buyers Need to Know

Article by Cripps Realty

With recent Bank of Canada rate cuts through the summer and into September, here’s what it means for your mortgage:

• Adjustable-rate mortgage holders will see a small decrease in monthly payments, leading to increased cash flow. For instance, a mortgage of $750,000 at a 6.20% rate had a monthly payment of $4,924. With the new 5.95% rate, the payment drops to $4,809, saving around $115/month.
• Static-payment variable-rate mortgages won’t have reduced payments, but more of your monthly payment will go toward the principal instead of interest due to the lower rate.
• Fixed-rate mortgage holders won’t experience immediate changes, but lower rates could provide better opportunities when refinancing or renewing.
• First-time homebuyers benefit from both lower rates and recent government rule changes, increasing qualification options and reducing barriers.

With two more Bank of Canada rate announcements expected this year, experts predict the overnight rate could drop further, potentially reaching 4.0% by year-end and 2.75% next year. While lower rates are good news, it’s important to consider other mortgage factors like type, down payment, amortization, and prepayment penalties when assessing affordability.