Bank of Canada delivers second consecutive rate cut

Today, the Bank of Canada announced a 25-basis point cut to the benchmark rate, bringing it down to 4.50%. This is the second rate cut and will further help to ease interest costs for those with variable-rate loans.

In its statement, the Bank said broad price pressures are “continuing to ease” and that inflation is expected to move closer to 2%.

If you’re interested in the full details, you can read the Bank of Canada’s full statement here. 

What happens next?

Lenders usually take a few days to adjust their prime rates in response to the Bank of Canada’s announcement. 

We expect the prime rate, which affects variable-rate mortgages and other loans, to decrease to 6.70% at most major lenders soon. TD Bank, which typically has a slightly higher mortgage prime rate, should see a reduction to 6.85%.

What does this mean for you?

This is great news for those with fixed-payment variable-rate mortgages! You can expect to see a decrease in the portion of your payment that goes towards interest.

If you have an adjustable-rate mortgage, where your payment fluctuates based on prime rate, you will notice a small decrease in your next payment. 

For fixed-rate mortgage borrowers, this rate cut won’t change your current term or monthly payments.

Other loans that are priced off prime, such as certain personal loans or lines of credit, will also see a reduction in their interest charged or monthly payments.

Looking ahead

The Bank of Canada’s next rate decision is scheduled for September 4. Whether we see another rate cut will depend on how the economy performs over the next month.