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Writer's pictureAllison Cosgrove

Benchmark Rate Dropped --- Bank of Canada did what?

The Bank of Canada lowered the "Benchmark Rate" earlier last month.


Thats great! Right?


Sort of.


Allow me to explain what the "Benchmark Rate" is. The "Benchmark Rate" is a number;


1. That dictates maximum mortgage money access for those with less than 20% down

2. To which the federal government has attached the hopes and dreams of many Canadians

3. Is controlled by Canada’s Big-Six banks

4. No one can clearly explain how is derived

5. Is essentially a mysterious number, a mysterious number that can and will rule your world.


Last month the Bank of Canada lowered the ‘Benchmark’ rate from 5.34% to 5.19%. Why? Why only 0.15%? Why now? As previously stated, who knows.


So what does that mean for me?


If you think back to January 1, 2018 when the government instituted the "Stress Test" and the "Benchmark Rate". This Bank of Canada rate is the number they basically handcuffed us to and, as of Jan 1, 2018 it effectively took away 35 cents of every dollar that you would have qualified for the day before.


Overkill? Maybe.


So how much did this 0.15% rate drop help?


How much of that 35 cents did we get back? $0.01 to be exact. It translates into 1.4% more buying power.


It may not be a whole lot but it is a step in the right direction. Hopefully.





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