Most people now are speculating that it is virtually certain that the Bank of Canada will drop the bank rate by .75%. We had earlier speculated that it could be .50% or .75% but due to the fact that the government did not release a stimulus package which means the bank feels they need to take more decisive action.
Royal Bank and Bank of Montreal cut interest rates recently. RBC cut their four year by .75%, likely because they don't want to compete in the 5 year market where everyone else is, smart move I have to say. BMO dropped their 5 year rate by 1.05%. (link)Why? Mostly because of the Government through CMHC providing additional liquidity to the market by purchasing insured mortgages, this allows the banks to lower their spreads (profit if you will) because they do not have to price in as much liquidity risk. This is a small indication that government interventions are working. As rates continue to drop both fixed and variable will bring many more buyers into the market, due to a significant increase in affordability, for people who were forced out of the market during the boom.Ready, set, GO!
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