For the second time in a row, the Bank of Canada has dropped their rate!
[00:00:02] You've landed on the Mortgage Life Podcast where we strive to bring you mortgage-related info that's easy to understand. We have conversations with market experts to bring you timely updates because there's one certainty in this industry, things change. I'm Mindy Bodewin and I'm Pete Salamosi.
[00:00:31] Welcome to the Mortgage Life Podcast. Here we are in person. In person? Hi. We're not just squares on a camera screen right now. We're actually here together, so Mindy's come up to the Okanagan to visit here in Vernon.
[00:00:52] And thankfully, we not only get to see each other in person, but we've got an announcement from the Bank of Canada today. A good news announcement. I think we got so used to bad news announcements, but now another one. Another Bank of Canada rate drop today. Yeah.
[00:01:09] So this is the second rate drop in a row, so second consecutive rate drop. And it is again another quarter point rate drop. It takes the total overnight Bank of Canada rate to 4.5%. And again, I'm going to explain how this whole overnight rate affects you and your mortgage.
[00:01:29] So overnight rate is the rate that the banks, the chartered banks, and credit unions and mortgage lenders, they use it to determine their prime rate. And so their prime rate will not as of yet, but will come down by a quarter point.
[00:01:46] So that prime rate will most likely drop from what it currently is at 6.95 down to 6.7. So watch for a notice. I mean, my bank still sends me a notice in the mail. Oh, lucky you.
[00:01:59] Or an email or something letting you know when your rate will officially go down. If you have a variable rate mortgage, a home equity line of credit, those with a fixed rate mortgage, no, this rate drop doesn't mean that your fixed rate is going to change.
[00:02:15] But in general, we have been seeing fixed rates adjusting as well. Fixed rates typically trend with long-term bond yields and with rates going down in the general market, I think there's sort of the consensus that those long-term bond yields will come down as well.
[00:02:31] A little bit technical, but kind of a good news story for everybody today. Right. So if you've got a variable rate mortgage, adjustable rate mortgage or line of credit,
[00:02:39] chances are you're going to see a notice from your lender soon that will say that your rate is going to come down. If you have a fixed rate mortgage, it's not going to necessarily affect you.
[00:02:49] But like Mindy says, if you're in the market for a new mortgage and you're looking at fixed rates, there might be a knock-on effect. There might be an effect that actually starts to bring some of those fixed rates down.
[00:03:01] So Pete, why is the Bank of Canada doing this now? I mean, I got so used to it and we're going up and down. And now we're going down and now we're going down. So what has changed?
[00:03:13] So the Bank of Canada is finally looking at, I mean it's not finally, it looks at these stats all the time. But basically it's gotten to the point where it says that the stats show that the inflation,
[00:03:24] which we've talked about a ton, inflation has moderated to the point where it's actually back down into their target range and their range is between 2% and 3%. And so as of the last stats that came out, which was June, the CPI inflation dropped to 2.7%.
[00:03:43] So that isn't within the range. And in addition to a few other factors, they deemed that they're getting to the point where they're actually okay with dropping the rate. They're essentially loosening the screws, loosening the reins on borrowing just a little bit.
[00:04:03] Again, very cautious, but they are loosening it. Don't want things to kind of go in reverse. So today, July, what is it? I'm sorry, I'm in a hurry. It's the 24th. July 24th, great announcement, positive news.
[00:04:17] The next rate of announcement from the Bank of Canada is going to be September 4th. It's going to be interesting to see what happens then. Maybe this trend will continue. It might. We'll just have to kind of wait and see. And as we like to say, stay tuned.
[00:04:33] Come back and listen because if there is a rate announcement and it changes on September 4th, we will be the first to let you know here on The Mortgage Life. Come back and listen. Enjoy your day. See ya. This is The Mortgage Life.