I have a mortgage from National Bank linked to the prime rate.. But i am not sure what this prime rate is.
This links provides all the rates from bank of Canada.
http://www.bank-banque-canada.ca/en/rates/interest-look.html
from the link my interest rate seems to match Prime business rate..


Can some one explain what is prime rate and which interest rate should be used from the link..


Thanks
The Dude

Check ur bank's website. It will have the prime rate posted. At least some of the mortgage lenders updates their websites only at intervals - first of the month in my case.

Hi Dude,

I believe you just bought a house and in the other thread (http://www.canadiandesi.com/read.php?TID=20978&page=4) you have mentioned: "I got a mortgage of 196000 at variable rate of .95 below prime currently working out to 3.80%."
You got to do the reverse maths, a little bit though. Think of the equation:
x-y=z where x is prime rate , y is a constant (in your case, it is 0.95) and z is the end result (in your case, it is 3.80). So by now, you must have got it. The current prime rate is 4.75%.

Hope this helps.

This should have been explained to you either by your realtor or mortgage broker/bank. This is the first step in my 'Buyer Counseling Session' which I share with my buyers.
I think few people are not doing their jobs properly

-----------------------------------------------------------------
Sanjeev Manocha, MBA
Real Estate Sales Representative
Accredited Buyer Representative (ABR)

Re/Max West Realty Inc, Brokerage
96, Rexdale Blvd., Toronto

Mobile: 416-843-7600
Office: 416-745-2300
http://www.manocharealty.com" rel="nofollow">LINK

Sorry sanjeev , u have misunderstood my question.

My Question is where does the 4.75 prime rate come from ..

1>
I think this prime rate is the National Bank prime rate which in turn is linked to some prime rate Bank of canada publishes.

I wanted someone from the morgage industry to demystify this relationship..

I need this info as The B Of Canada changes various rates some of which are not related to the Morgage prime and every time the B of Canada announces the changes i can easily know i am affected or not..

2>
Lets say the BOFCanada reduces the Prime is my Bank manadated to reduce its prime..

Quote:

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Originally posted by sanjeevm

Hi Dude,

I believe you just bought a house and in the other thread (http://www.canadiandesi.com/read.php?TID=20978&page=4) you have mentioned: "I got a mortgage of 196000 at variable rate of .95 below prime currently working out to 3.80%."
You got to do the reverse maths, a little bit though. Think of the equation:
x-y=z where x is prime rate , y is a constant (in your case, it is 0.95) and z is the end result (in your case, it is 3.80). So by now, you must have got it. The current prime rate is 4.75%.

Hope this helps.

This should have been explained to you either by your realtor or mortgage broker/bank. This is the first step in my 'Buyer Counseling Session' which I share with my buyers.
I think few people are not doing their jobs properly

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As long as I understand, all the loans (car or personal or business or mortgage) everything is been measured on basis of the prime rate being derived by Bank of Canada. The interest rates on all the loans are either given in + or - percentage compared to this prime rate, conditionally that you have a variable rate on your loan.

If you have a loan which is on a fixed rate then it does not alter when Bank of Canada changes its rate.

Prime rate is also called the LENDING RATE (the rate at which the money is lended)

All the bank & financial institution are mandatorily supposed to follow that.

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i..........rock........!!!!!

Hi dudes...

B of C lowers, raises or holds steady the rate at which it lends money to the banks sometimes referred to its key interest rate or overnight lending rate based theoretically on where it sees the economic health of the economy of the country and to direct it, the economy, where it (the govt) wishes it (the economy) to go

See recent link where B of C has held the rate steady today at 3%.


http://www.globeinvestor.com/servlet/story/RTGAM.20080903.wbankrate0903/GIStory/

Usually the prime rate of banks - which is a benchmark to guage at what rate they should lend money to their clients - is prime+1.75% in Canada.

So currently the prime rate for the banks is 4.75%.

Banks are not mandated to follow changes in their rates according to rate announcements by B of C, however competition usually leads to this.

If you wish to read an article on this google
'banks not to follow bank of canada's rate cuts'
and several sites will show up.In short:

In between, earlier on this year, when B of C starting aggressively cutting its key rates from 4.50% to match cuts in the US, there was talk that banks may not follow suit, but if one major bank did it, others had to step in line o/w all the business would have gone to the bank that cut its rate. Thus the prime rate fell from 6.25% to 4.75% across the board, where it stands at today.
Just as an FYI, most financial institutions also go in tandem with B of C including credit unions and trust companies.



Had B of C cut its rate today by a 1/4 percent which some analysts predicted, most likely all banks would have followed suit and the prime rate would've dropped to 4.5% and your mortgage rate being a variable rate would've also experienced a 1/4% haircut, most likely for your next payment unless of course you opted for variable rate but fixed payment if rates go down (I don't know if the reverse is available though I doubt it, i.e if rates go up your mortgage payments still remain the same- known as the accordion style mortgage)

Great explanation "investpro" u personify ur name

Quote:

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Usually the prime rate of banks - which is a benchmark to guage at what rate they should lend money to their clients - is prime+1.75% in Canada.

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Quote:

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Originally posted by investpro

Hi dudes...

B of C lowers, raises or holds steady the rate at which it lends money to the banks sometimes referred to its key interest rate or overnight lending rate based theoretically on where it sees the economic health of the economy of the country and to direct it, the economy, where it (the govt) wishes it (the economy) to go

See recent link where B of C has held the rate steady today at 3%.


http://www.globeinvestor.com/servlet/story/RTGAM.20080903.wbankrate0903/GIStory/

Usually the prime rate of banks - which is a benchmark to guage at what rate they should lend money to their clients - is prime+1.75% in Canada.

So currently the prime rate for the banks is 4.75%.

Banks are not mandated to follow changes in their rates according to rate announcements by B of C, however competition usually leads to this.

If you wish to read an article on this google
'banks not to follow bank of canada's rate cuts'
and several sites will show up.In short:

In between, earlier on this year, when B of C starting aggressively cutting its key rates from 4.50% to match cuts in the US, there was talk that banks may not follow suit, but if one major bank did it, others had to step in line o/w all the business would have gone to the bank that cut its rate. Thus the prime rate fell from 6.25% to 4.75% across the board, where it stands at today.
Just as an FYI, most financial institutions also go in tandem with B of C including credit unions and trust companies.



Had B of C cut its rate today by a 1/4 percent which some analysts predicted, most likely all banks would have followed suit and the prime rate would've dropped to 4.5% and your mortgage rate being a variable rate would've also experienced a 1/4% haircut, most likely for your next payment unless of course you opted for variable rate but fixed payment if rates go down (I don't know if the reverse is available though I doubt it, i.e if rates go up your mortgage payments still remain the same- known as the accordion style mortgage)

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