Variable mortgage rates regaining traction as Bank of Canada cuts rates – MoneySense

Are more rate cuts likely?

In announcing the rate cut Wednesday, Bank of Canada governor Tiff Macklem said if inflation continues to ease broadly in line with the bank’s July forecast, it is reasonable to expect further cuts in the policy rate. 

Julie Leduc, a mortgage broker at Mortgage Brokers Ottawa, said clients with variable-rate loans were not happy when rates were rising, but the cycle is turning. 

“We’ve lived the worst of it, we’re on our way out,” she said. 

“So let’s look for the benefits and the benefit is, if they go variable and the rates go down, they’re going to live the benefit.”

Right now, the rates offered to those looking for a new variable-rate mortgage or needing to renew are higher than those being offered for five-year fixed rate mortgages, something that Leduc called an anomaly.

That’s because the expectations are that the Bank of Canada will continue to cut interest rates, lowering the amount charged to borrowers in the future. If something unexpected happens and the central bank doesn’t cut rates, then the rates charged on variable-rate mortgages won’t go down.

What to expect if you’re mortgage holder

But if things continue to roll out as expected, those choosing variable-rate loans will see the amount they are charged go down. Just how much and how quickly will depend on the central bank.

Sojonky says the discounts lenders offer to the prime rate for variable-rate mortgages are also improving.