The US Federal Reserve, the Bank of Canada, and the Bank of England have all cut interest rates. This should be great news for mortgage holders, right? Not so fast.
Not all of these interest rate reductions have made it down to the mortgage interest rates charged by banks. The gap between central bank rates and mortgage rates offered by banks has been growing.
So, don’t rush in to renegotiate your mortgage assuming that the new rate will be much lower. Take a careful look at the new rate your bank offers and compare the interest savings to any penalties charged for breaking your current mortgage. You may be better off to keep your current mortgage.
There is a nice chart on Canadian Mortgage Trends that shows bond yields going down but the 5-year fixed rate not moving much. Also, press reports indicate that discounts off prime for variable rate mortgages are 0.6% now, down from 0.9% last summer.
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