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How Latest Rate Cut Will Benefit Mortgage Borrowers?

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Want to apply a mortgage? Eager to know how the latest rate cut will impact mortgage payments? The central bank declared on January 29 that it would reduce its lending rate by 25 basis points to 3%. The BoC lowered its lending rate by 50 basis points in December for commercial and residential mortgages.

The BoC said, the governing council chose to lower the policy rate by an additional 25 basis points to 3% due to the economy’s excess supply and inflation of about 2%. Since last June, the policy rate has continually decreased.

What should Canadians expect from the rate cut in January?

Many Canadians may get interest rate relief if the BoC lowers lending rates generally. The interest rate that financial institutions charge on loans and mortgages is influenced by the lending rate set by the central bank. Therefore, applying a residential mortgage in Abbotsford may become more costly for Canadians as the BoC’s lending rate rises.

Rate reductions may result in a larger portion of a Canadian’s mortgage payment going toward the principle and less towards interest for those with variable rate mortgages. A rate drop by the Bank of Canada does not immediately affect Canadians who have fixed rate mortgages. Current fixed mortgage rates are a reflection of fixed rate mortgages, which are often based on five-year bond returns.

Will rates continue to be lowered by the BoC in 2025?

The Canadian economy may be impacted by the prospect of a 25% tax on Canadian exports under US President Donald Trump. The expansion of the Canadian economy may suffer if Trump imposes sweeping tariffs. This implies that the BoC may accelerate rate reduction to provide a buffer for the economy.

By the end of the year, the BoC will lower its lending rate by an additional 100 basis points. This implies that the BoC’s loan rate may be close to 2% by the end of 2025. The Bank of Canada will keep an eye on the unstable economic landscape. Core inflation may be on the rise, which supports the central bank’s decision to reduce interest rates more gradually this year.

Key Takeaways

The loan rate was recently lowered by 25 basis points to 3% by the Bank of Canada (BoC). This 2025 first rate announcement indicates that the central bank is still in the midst of its rate-cutting era. Canadians may find it more affordable to borrow money whenever the Bank of Canada lowers its lending rate.

If you are looking for a mortgage broker in Abbotsford, to help you understand the rate cut benefits or if you are planning to apply a residential or commercial mortgage, rely on none other than Sandhu & Sran Mortgages. For past many years, we are assisting eligible borrowers in getting approved for a mortgage at the lowest rate possible. Contact us to get started with your application.

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