Wednesday, September 08, 2010

Bank of Canada Raised Prime Rate - mortgage rates to follow

The Bank of Canada Raised the Prime Rate Today

The Bank of Canada raised its key prime interest rate by a quarter of a per cent today, for the third consecutive time this year.

The Bank noted in its announcement that it “now expects the economic recovery in Canada to be slightly more gradual” than it predicted at the time of its last rate hike in July, citing weaker economic activity in the U.S.

However, the Bank also stated today that consumption growth in Canada “is expected to remain solid and business investment to rise strongly” supported by “accommodative credit conditions, which have eased in recent weeks mainly owing to sharp declines in global bond yields.”

Pricing on many fixed mortgages for new borrowers has been edging down in recent weeks but this may reverse the trend.

A competitive rate for a five-year fixed mortgage is now available and can be found if the buyer looks carefully at 3.89 per cent for qualified borrowers.

A competitive variable rate mortgage is available to qualified borrowers at 2.35 per cent (prime of 3.00 per cent minus 0.65 per cent), factoring in the Bank’s rate increase today.

Most lending institutions and Banks in Canada are expected to respond to the Bank’s rate hike by increasing their prime lending rates by a quarter point, although lenders vary in when they adjust their rates for variable-rate mortgages.

Contact your mortgage professional for more information on how a particular lender may implement a rate increase.

All the best!

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