NEWS UPDATE: Federal Government Raises Insured Mortgage Cap to $1.5M, Expands 30-year Amortizations
Breaking News With Lending Rates!
The recent drastic change in our economic lives has meant that the big institutions, whether financial or other; has also had to adjust its business model! Fortunately, this is good news because they sympathize with the many affected economically. Some interesting comments were also made by economists and businessmen.
Just after mid-March, the Bank of Canada announced it is lowering interest rates by 50 basis points to 0.75%, the country’s largest banks cut their prime lending rates from 3.45% to 2.95%
RBC, BMO, TD Bank, Scotiabank and CIBC slashed their prime rates – which underpins variable-rate mortgages and lines of credit – was effective Tuesday, March 17. Meanwhile, the National Bank of Canada reduced its prime rate on March 18.
The Bank of Canada said that it cut interest rates, the second in two weeks, as a proactive measure “taken in light of the negative shocks to Canada’s economy arising from the COVID-19 pandemic and the recent sharp drop in oil prices.” The move was welcomed by several in the mortgage industry as a strong response to the uncertainty caused by these economic challenges.
“The BoC is acting forcefully to reduce the impact of the coronavirus on the economy,” said James Laird. “It is in these uncertain times that Federal institutions acting quickly and intelligently can reduce the negative impact of unforeseen events.”
However, some experts have warned that the same uncertainty will cause banks to hold back on passing the 50-basis-point rate cut to consumers.
In an email to BNN Bloomberg, Rob McLister, founder of a mortgage comparison website, said a slew of macroeconomic headwinds facing the big banks make him skeptical the lenders will pass along the 50-basis-point prime rate cut to consumers.
“What banks giveth with one hand they will taketh with the other by way of variable-rate discount reductions,” he told Bloomberg News. “The weather forecast for banks is hurricane, tornado, and tsunami all in the same month. They’re getting sucker-punched by surging credit spreads, shrinking interest margins, rising loan loss reserves, and increasing default risk (even though mortgage arrears are little changed yet.)”
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