We have seen the novel coronavirus spread faster than many of us thought. COVID-19 has closed schools and is hurting the economy. Today Alberta declared a state of emergency and most non essential services are closed.
Two weeks ago the Bank of Canada lowered it’s overnight rate by a half percent. This was the largest single-day drop since 2008. Just over a week later on Friday the 13th, they did it again in an unscheduled rate announcement.
The major banks didn’t immediately follow suit, but as of today, we have seen the banks pass along the full half percent rate drop again.
Current variable rate mortgage customers will now see their mortgage rate drop a full percent from February. Rate drops like this typically come in effect the start of the next month so your March payments are not impacted but April’s are.
Most variable rates change payment when rates change. However some of the major bank variable rates keep the payment the same, but now you will pay more principle in each payment.
Fixed rates have also been going crazy. It is normal in the springtime to see interest rates drop, but a week and a half ago, following the first Bank of Canada announcement, we saw the stock market drop significantly as well as the bond market. The bond market is the primary driver for fixed-rate mortgage rates. When this happened we saw major rate drops from some of our lenders, but those rate drops were short-lived and most have since increased with a bit of a recovery in the bond market Friday and onward to today.
With the virus shutting so much down, there will be some out of work for a while. Making mortgage payments will be more difficult for some of you. There are payment relief programs with most mortgage companies. I will be publishing details of that soon once we have a more comprehensive list. I will also send that information out by email.
These are unprecedented times. The immediate future is unsure, but long term things are still looking good. With downward rate movement, there are opportunities for some of you who hold fixed-rate mortgages. If you want to discuss those, please reach out to me.