Last week, we saw the first rate cut by the Bank of Canada in almost 5 years. While a 0.25% rate cut was expected, the BOC came through with a whopping 0.50% cut.  The banks quickly matched the full cut bringing their prime rate down to 3.45%.  Other mortgage lenders then followed. 

The cut was fueled by increasing coronavirus concerns, which has now become a pandemic.  The massive BOC rate cut has sent bond yields plummeting down to record lows.  Global financial markets have also taken a major hit. On Monday, the Dow Jones Industrial Average saw its largest single day drop in history. We also saw one of the largest (if not the largest) single day drop to bond yields.  As a result, heavy downward pressure remains on fixed mortgage rates. 

 

Another Cut To Prime Rate? 

While it took the BOC almost 5 years to cut their rate, we’ll likely see them cut it by another 0.25% on their next scheduled rate announcement to take place on April 15th.  While the rate cut is expected, it’s still just a prediction.  We expected a rate cut from the BOC in April of 2019 as well, yet they did not come through until almost a year later… and it took the coronavirus to push them to make the move. There is a very good chance that we’ll see the cut happen next month however. 

 

The Cornavirus and its Effect On Mortgage Rates 

While the coronavirus is a pandemic and its future is uncertain, we’ve been in these situations before and we’ve always made it through them. We have 37 million people in Canada and there are 93 confirmed cases of coronavirus as of yesterday, March 10th.  There has only been a single death in Canada to date. While these numbers are low, the coronavirus can multiply quickly. It will get worse before it gets better.   I have full confidence that this will be brought under control, at which point, financial markets will flourish.  This also means the BOC will increase their rate, and bond yields will trend back up to previous levels, which will place immediate upward pressure on fixed mortgage rates.  Until then, rates will remain at historically low levels. 

As of now, the lowest 5 year fixed rate has fallen to 2.19%.  The lowest variable is prime -1.25% (2.20%).  These rates apply to insured mortgages and those with 35% or greater down payment / equity.Purchase price must be under $1 million OR property must have been purchased prior to November 30, 2016 (providing you have not refinanced after this date).  Maximum amortization is 25 years. 

 

 

 

 

Paul Meredith is the author of the Amazon #1 best selling book, Beat the Bank
– How to Win The Mortgage Game in Canada, and has ranked as one of the top
75 mortgage brokers in Canada since 2016. He was a finalist for Mortgage
Broker of the Year in 2018, and can be seen as the exclusive mortgage broker on
season two of TV’s Top Million Dollar Agent.