“I don’t see much of the cuts come into the consumer,” says Anthony Ambrosio, an agent with CSI Mortgages. “No bank has made any major shift to reduce rates, so it’s pretty stable.”
Canada’s central bank lowered its overnight interest rate to just 0.5 per cent on July 15, and TD Bank quickly followed suit, dropping its prime rate by 10 basis points; CIBC, BMO, and RBC followed with 15-basis point cuts of their own.
Many brokers were hoping the BoC’s latest cut – followed by reductions at the banks –would lead to the usual flood of refinancing request. But that influx of applications hasn’t yet materialized.
“I think what’s going to have to happen is the banks are going to have to start posting some pretty aggressive interest rates, below two per cent for a five-year fixed,” Ambrosio says. “But we’re not seeing that right now.”
Still, the media attention surrounding the Bank of Canada’s decision is leaving some impression on consumer minds. Tina Francis, the regional vice president of sales for Broker Financial Group, says her clients have already started inquiring about the potential benefits to refinancing at this lower rate.
“There are definitely people asking about breaking the mortgage and refinancing,” she says. “When it’s out in the news, people tend to inquire more. They’re trying to see what the penalties are or they’re shopping around with different mortgage brokers just to see what they can get.”
The number of those clients who actually choose to pay the penalty to break the mortgage and take advantage of the lower rate has yet to be realized. In fact, brokers are – for the most part – dismissing the BoC’s rate cut altogether.
“I doubt we’ll see (an influx of refinancing),” Ambrosio says. “I just think the reduction in interest rates is to keep the economy moving forward, more geared to business than anything else.”
Brokers counting on refinancing business spurred by the Bank of Canada’s surprise interest rate decision earlier this month might be disappointed, as fewer homeowners were seduced with this round of rate cuts.