B of C cuts rate another .25%... But where does this leave my Variable Rate Mortgage?

B of C cuts rate another .25%... But where does this leave my Variable Rate Mortgage?

July 15, 2015

If you have a Variable Rate mortgage, then at some point, you had to make a "risk" decision...."What if rates go up?"

It is always good news when Bank of Canada drops their prime lending rate. Since a varaible floats with prime, your rate would typically decrease the same. But that is not always the case, just because the Bank of Canada decreases a rate, sometimes the banks decide to drop a portion of the rate, and of course, absorb the profits, for example:

January 21st 2015 B of C cut rates .25%.... so if prime rate was 3.00%, it would now drop to 2.75%, but the banks only dropped to 2.85%, .10% apart from B of C

Now July 15th, B of C again has dropped .25% .. so we should see prime at 2.50%.... but it looks as though banks will only drop .10%!!, so yes, another .15% apart from B of C.

So as you can see, our prime rate should be at 2.5%, but will likely be given to us consumers at 2.75%. How does this reflect to our day to day mortgages?... this is why you need to connect with a Mortgage Teacher.

for more info on the Bank of Canada rate cut.