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Originally posted by kalia

So, that is what my question is.

If BOC cut down rate by .50 basis points, how this going to help the current consumer or future consumer ( looking for Mortgage).

If there is no substaintial change or reduction for any type of customer, How we are concerned with the bank rate cut?

Is it worth discussing BOC rate cut under the circumstances if there is no tangible benefit to consumer ?

Thanks

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Howdy Kalia,

Here is an example.
Let us say bakra A (arey just to add a little levity yaar) took a variable rate mortgage last year at prime -0.75% for $250,000.

The prime late last year was 6.25% so his rate was 5.5%.
At that time his monthly payment would've been (compounded annually) approx $1515 for a 25 year mortgage. Then when the prime was adjusted downwards by 0.25% to 6%, his payment would've been adjusted accordingly.
Now, after the recent cut from BoC, the new prime rate is 5.25%. Bakra A's monthly payment will now be calculated at 4.5% or new payment will be approx $1375, or a lowering of $140 from the original. So Bakra A has now got excess of $140 which he can either invest or use to pay down extra on his mortgage, so as to get rid of it faster.
Note above is based on monthly payments and annual compounding.
When going for a mortgage you can ask for semi-annual compounding also and bi-weekly payments and possibly another few bells and whistles.
So some action does trickle down to the consumer.
The fixed rate Bakras- for the time being unka to vaat lag gaila.
Anyway as noted in my posts previously, in the long run, (mortgage is a 25 year or more commitment initially), the variable rate option has proved beneficial in both Can and the US.
You can google for confirmation.
Also if you are a new Bakra, the payment on a variable rate now is lower than before the BoC rate cut.

Similarly for LOCs, HELOCs.