Why Your Bank Did Not Decrease Your Variable Mortgage By .25%.

Isn't a variable rate mortgage tied to the Bank of Canada Rate? So if the Bank of Canada decreases it's Prime Rate, should your variable rate mortgage go down accordingly?

Answers:

#1. Sort of
#2. Maybe

Banks with their deep pockets and highly paid government lobbyist have successfully created for themselves a loop hole in the law so they do not have to follow the Bank of Canada Rate.

If you look at your paper work, it will not say, "your rate is Bank of Canada Prime Rate Minus Prime - 0.6%". Rather it will say the lender's Prime Rate Minus 0.6%. So if your lender is TD Bank then it will say TD Bank Prime Rate Minus 0.6

This gives the bank the option to follow or not to follow the Bank of Canada Prime Rate.

This is why when the rates dropped, the banks did not automatically follow. It took them a week to drop. They decided only to drop it by 0.15% and not the full 0.25% the Bank of Canada dropped their Prime Rate.

I suspect over the next month it will get down to the 0.25%.

You can thank the small lenders for this. Small lenders will use this as a marketing ploy and eventually all the banks will follow.

So overall your variable rate will decrease, it will only just take a few months, maybe one or two.