Huge, this is just huge… (it’s not)
Last week the Bank of Canada lowered the ‘Benchmark’ rate from 5.34% to 5.19%, this is a number that:
- dictates maximum mortgage money access for those with less than 20% down
- to which the federal government has attached the hopes and dreams of many Canadians (effectively crushing said hopes and dreams)
- is controlled by Canada’s Big-Six banks
- no one can clearly explain how is truly calculated inside the banks
- is essentially a mystery, a mystery that rules your world
This number mysteriously came down 0.15% last week. Why not weeks and weeks ago? Why not more? As per above; who can say?
Ultimately lower is better for you, if not for the Big-Six.
Lower means you can access more mortgage money.
How much more you ask?
First some context…
Remember Jan 1, 2018 when the Government implemented the stress test? The image above is a snap shot of the impact on sales volume from the ‘stress-test’, a.k.a. the ‘B20’, a.k.a. ‘Operation Overkill‘.
That plummeting line is not average home prices, it’s the sales volume. That figure matters, because that 40% decrease in sales basically wiped out $500,000,000.00 in economic activity in BC. Affecting many people across the board, not just Realtors.
If the value of the average home were to fall 40% you would see a massive decrease in economic activity and in short order a serious recession. One must always be careful what they wish for.
This Bank of Canada rate is the number they basically handcuffed us to via the stress test, as of Jan 1, 2018 it took away 35 cents of every dollar that you would have qualified for the day before. A bit extreme? Perhaps.
Where you had a dollar of mortgage money on New Years Eve, you woke up the next day with access to just 65 cents.
Ouch, party over.
This was done to protect you from yourself. The federal government cares about you, in particular they care about decreasing home ownership in Canada. Not so much the values, just the number of people able to purchase one.
OK, OK, But how much did this rate cut help me?
How much of the missing 35 cents did you get back last week?
basically 1.4% more purchasing power.
So is the market about to rally?
No so much.