This is big news for a market that was not expecting a drop in the Prime Rate today.

As mentioned in our last newsletter the price of oil will have a dramatic impact on mortgage rates this year, and this is probably just the beginning.

This is obviously great news for Variable Rate Mortgage Holders. It could also be great news for Fixed Rate Mortgage holders, as long as they act quickly.

If you are in a Fixed Rate product it is time to schedule a call with us. Although it is great news that Variable Rate Mortgages will now be priced at or below 2%, the bad news is that Fixed Rate Mortgages will also drop resulting in bigger breakage penalties. So….  The sooner you refinance into a Variable Rate Mortgage the better. If you have a mortgage with a Canadian Bank they will be charging you a penalty based on their prevailing fixed rates and the discount they gave you when you received your mortgage. If this is you, don’t worry we can help you navigate the stormy waters of breaking a Bank Mortgage.  However, If you received a mortgage from MorCan Direct with one of our Non Balance Sheet Lenders, we can break your mortgage as easily as an egg.

By acting quickly and breaking a fixed rate mortgage today you could save thousands.

Now a little bit about what the Bank of Canada is saying.

The Bank of Canada says that the drop in Oil Prices is “Unambiguously Bad for Canada”.

The drop in the Overnight Rate to 0.75% from 1% is the first move since September of 2010. The Bank of Canada has said that the drop in oil prices will be “negative for growth and underlying inflation in Canada”.

The Governor of the Bank of Canada believes that we will benefit by “repositioning our economy to fire on all cylinders”. By reducing the cost of money and therefore the price of our Dollar relative to the US Dollar it is the Central Banks belief that we will be made more competitive in our exports to the US.

The Bank of Canada is trying to minimise the incredible impact the dropping price of oil will have on our economy. It is now abundantly clear that the Bank is now less concerned with “Household Imbalances” (increased consumer debt levels), and far more concerned with the number of jobs that will be lost because of the dropping price of oil.

Although this will likely help Ontario’s economy in the short to medium term, increased consumer debt levels will cause us some heartache as interest rates start to normalise –whenever that might be.

Today’s move has further illustrated Canada’s new dual economy conundrum. It will be interesting to see how much stimulus the Bank of Canada feels will be required to compensate for the drop in oil and just how that will affect us in Ontario.