Rates dropped this week … coronavirus effects caused the Fed to drop their rate 0.50% on Tuesday and the Bank of Canada followed on Wednesday: the Fed move was definitely a shock, as they were not scheduled to announce until March 18. The Fed hasn’t made an unscheduled announcement since 2008, and even then it was co-ordinated with Central Banks around the world.
Once the Fed dropped, it became inevitable that the Bank of Canada too, and it just so happened that we were scheduled for an announcement on Wednesday. Note that this may not be the last time the BoC drops its rate, as they have been one of the few holdouts among Central Banks, and many observers were already recommending a 25bps drop prior to the Fed announcement.
As is the norm, the Big Banks have cut Prime Rate to 3.45%: note that they aren’t obligated to follow the BoC rate, and in view of the current circumstances, there was some discussion that they might not. We are watching the Benchmark and Stress Test rates closely.
Of course these cuts are very inflationary, particularly for real estate as we've continued to see a supply issue across Metro Vancouver.
All this means that mortgage rates are dropping by the minute: at the time of writing, 5 yr High-ratio Fixed is down to 2.49%, and regular 5yr fixed 2.59%: with the Prime Rate cut, Variable, both Conventional and Insured, at P-1.00% works out to 2.45%.
Most lenders have moved to a structure where they have a “base” rate for conventional LTVs up to 65% (or so), with premiums based on LTV above (or some variation thereof) … and a separate rate for high ratio. An example with a conventional 3.69% base rate:
- LTV <65% = 3.64%
- 65.01% - 70.00% = 3.69%
- 70.01% - 75.00% = 3.74%
- 75.01% - 80.00% = 3.79%
- BUT >80% = 3.59%
- What’s more is that these are limited to 25 yr amort, regardless of LTV … 30yr amort is still available below 80% LTV, but the rate is 3.79%+
The premiums vary from Lender to Lender.
If you have any questions, we work with the leading industry professionals to set you up with fantastic brokers that offer competitve rates. Please give us a call anytime to discuss how these changes will affect you!