TORONTO — Borrowing costs for mortgages, auto loans and other lines of credit are set to head lower after the Bank of Canada cut its key lending rate by half a percentage point.
James Laird, co-founder of Ratehub.ca, says homeowners with variable rate mortgages should see rates start to fall this week, though it remains to be seen if banks will pass on the full rate cut to borrowers.
Ratehub says a full 50-basis point cut to a $450,000 mortgage on a 2.6 variable rate would shift the mortgage rate to 2.1 per cent, and mean about $115 per month in savings per month.
Laird says the cut will also likely mean lower interest rates for savings accounts and guaranteed investment certificates, putting pressure on retirees and other savers.
Doug Hoyes, a licenced insolvency trustee at Hoyes, Michalos & Associates Inc., says the rate cut is a good opportunity to pay down debt, but said potential borrowers should be cautious.
He says the Bank of Canada lowered rates because of concerns about the economy from the coronavirus, so borrowers should consider an extra buffer and be mindful of the potential that future income could be impacted.