OTTAWA — The decision by the Bank of Canada to cut its key interest rate target this week was good news for borrowers with variable-rate mortgages, bringing back some of the shine for the once popular loans.
The rate cut prompted big commercial banks to lower their prime rates, which are used to set the rates charged for variable-rate mortgages.
But the reverse was also true. When the central bank started rapidly raising rates in 2022 in an effort to bring inflation under control, those with variable-rate loans saw their costs march higher in lockstep. The increase in rates meant either higher payments or less principal being repaid on the loans.
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."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." 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.
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