Navigating the world of mortgages can be daunting, especially with fluctuating interest rates. The Bank of Canada's decisions on the overnight rate play a crucial role in shaping your mortgage payments and overall financial strategy. Whether you're a current homeowner or planning to buy, understanding these changes is key to making informed decisions.

Current Overnight Rate: Holding at 5% The Bank of Canada has decided to keep the overnight rate steady at 5%. This key interest rate influences the cost of borrowing money in the economy and directly affects mortgage rates. In Canada, the economy has nearly stalled since the middle of 2023, and is expected that the GDP growth will remaining nearly at zero, for the second quarter of 2024. The Bank of Canada anticipates, that we will start to see economic growth by mid 2024. Given the outlook, the Governing Council decided to hold the policy rate at 5% and to continue to normalize the Bank’s balance sheet. The Council is still concerned about risks to the outlook for inflation, particularly the persistence in underlying inflation. Governing Council wants to see further and sustained easing in core inflation and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour. The Bank remains resolute in its commitment to restoring price stability for Canadians.

Impact of the Rate Hold on Variable Rate Mortgages For clients of Jessie Lavoie Mortgage Group, and borrowers in general, the rate hold brings a period of stability:

Adjustable Variable Rate Mortgages: If you have an adjustable variable rate mortgage, your monthly payments will fluctuate with the prime lending rate.
Static Variable Rate Mortgages: Those with static variable rate mortgages, your payments will remaining unchanged and consistent. Unless you have hit your trigger rate, or trigger point. With a static variable rate, your interest, and principle breakdown within your payment will change.

What is the Overnight Rate? The overnight rate is the interest rate set by the Bank of Canada at which major financial institutions borrow and lend one-day funds among themselves. It's a primary tool for monetary policy, influencing other interest rates, including those for mortgages and consumer loans. Changes in the overnight rate can make borrowing more or less expensive, impacting the economy at large.

Impact of Rate Changes on Variable Rate Mortgages For clients of Jessie Lavoie Mortgage Group, and borrowers in general, understanding the effect of rate changes is essential:

Rate Increase: If the Bank of Canada raises the rate, those with variable-rate mortgages may see their monthly payments increase. This is due to higher interest costs for adjustable-rate mortgages and altered interest calculations for static variable rates.
Rate Decrease: Conversely, a rate decrease can lead to lower monthly payments for adjustable-rate mortgage holders and more favorable interest calculations for those with static variable rates.
Rate Hold: Should the Bank of Canada hold the rate steady, your current mortgage conditions remain unchanged. This stability can be a relief for borrowers, maintaining the status quo for your payments and interest rates.

Why Contact Lavoie Mortgage Group? As market conditions shift, having a knowledgeable mortgage professional by your side is invaluable. We offer expert advice and personalized solutions, helping you understand these changes and how they impact your mortgage. We're committed to guiding you through rate fluctuations and ensuring you have the best strategy in place for your financial goals.

Staying informed and prepared for rate changes by the Bank of Canada is crucial for any mortgage holder. Whether seeking clarity on your current mortgage or exploring new borrowing options, Lavoie Mortgage Group is here to assist. Contact us today for personalized advice and support in navigating these important financial decisions.