Interest rates are plunging - so why aren't mortgage rates?

Date Posted: April 6, 2020

As a result of the effects of Covid-19 on world markets central banks around the world have slashed their benchmark interest rates to pretty much zero in an attempt to stimulate the economy by making it as easy as possible to borrow, spend, and invest.

However, in Canada mortgage interest rates are not going down as much as the Bank of Canada and in some instances mortgage interest rates are going up.

There are a number of reason why this is happening, but primarily banks typically borrow the money they are lending out and make money on the spread between how much they are changed and how much they turn around and charge the borrower.  Though the overnight lending rate with the Bank of Canada is at historic lows we are seeing rates moving in the opposite direction with lenders across Canada.

Other factors driving this movement in interest rates are include the Banks building risk into their portfolios, as well as the belief of a looming recession on the horizon as a result of Covid-19.

To see the full CBC article, click here:

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