Where are refinances from the rate cut?

by |
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.

“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.”
  • kac on 2015-07-22 1:38:27 PM

    i for one can't see where the interest rate reduction will help the economy move forward,if anything possibly regress. Interest rates have been at an all time low for a few years and every time another rate cut is announced the federal govt comes up with yet more innovative ideas as to how to make secured lending harder and harder to get to and more people more more reliant on living on line of credits and visa's which by the way are just as easy to access as they were when the 0% down mortgages and 40 year amortizations were around or utilize their equity by having their mortgages taken over by the sub prime market until such time as the equity is no longer there and their home is taken over. My guess is the feds don't seem to think there is a problem there? Back 8 or 9 years ago when rates were double what they are now the economy flourished and Canadians were working. I understand there are also other factors that determine the economic factors however i dread thinking about the future our next generation has to look forward to.

    just my thought.

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Name (required)
Comment (required)
By submitting, I agree to the Terms & Conditions