That's Fair, Right?

When it comes to your finances you need to ask this in many areas. I recently heard reports that "many economists felt that a .25% drop in interest rates would not suffice, that a .5% would be needed from the Bank of Canada to assure the public during these times". In this CBC article it states that 6 out of 10 wanted the .5% drop. Here is the funny part. It seems that a lot of these economists are employees of the banks. Take the economist quoted in this article, Dawn Desjardins, assistant chief economist at Royal Bank.

Why would the banks want the overnight rate dropped? Didn't they just take away all of their discounts on the variable rate mortgages? Now that they are prime plus they want prime dropped.

Here is what I know. Someone looking to buy a home that was looking at prime -1% was sitting in and around 3.75% to 4.25% on a variable rate mortgage. Now they are prime +1% and they are looking at 5% and higher even with the drop in the BOC rates at most institutions.

As a home buyer, today more than ever, you need to get shopping on your mortgage. You should always shop around. A mortgage broker is a great tool to keep the banks honest (trust me, they need it). So when hunting for that new house, call your bank, but also call a mortgage broker. Make sure that you are not required to pay the broker. They get paid from the lender.

That's fair, right?

M