Rate Drop Welcomed
The 50 basis point reduction has some of the major banks to drop their Prime lending rate to an amazing 2.5%!
What does this mean for mortgage borrowers? At a variable rate of 3.3% the mortgage payment per $100,000 is only $400 per month. In other words a $300,000 home will have a mortgage payment of $1,200 monthly. Many renters are paying more than this in rent each month! Perhaps this will be the nudge to get first-time home buyers off the fence!
As I tell my buyers, if you are serious about getting into a new home, get pre-approved on a mortgage. Talk to your bank, talk to several mortgage brokers and find out who can give you the best deal for your financial situation.
If you are already in a fixed rate mortgage, check to see if the penalty is worth taking to get into a lower variable rate mortgage.
In the States they are trying almost anything to get people buying again. One large new-home builder, through their lending arm, is offering a 4% fixed rate over 30 years! Can you imagine?
Will our rates go any lower? The Bank of Canada has hinted at another 25 basis point drop in the very near future and they expect the rates to remain low into the latter half of 2010. Whether the major banks pass along the savings to the common folk remains to be seen.