Prime rate falls to 6.70%, making variable rate mortgages more attractive + MORE Jul 26th

Ask MoneySense
I wish to leverage my HELOC to invest in dividend-paying investments. How would you advise I approach this? Is this an effective tax savings tool? Is there any financial institution or products you would advise?

—Martha

Borrowing from a home equity line of credit

You know, Martha, in some circles, leveraging—or borrowing to invest—is a taboo subject. I find that funny because there is much less controversy when people borrow to:

Buy a car, which depreciates in value;

buy a house, which normally appreciates, but it can decline;

or take a vacation as a lifestyle investment.

So, why is there controversy around borrowing to invest? It is probably due to a lack of understanding, coupled with the fact that when leveraging goes bad, it’s not good.

Let’s talk about leverage. If you borrow $100,000 at 8%, what rate of return would you have to earn on your investments to break even? Would you guess 8%?

Most people would agree with that answer; it sounds logical, right? I mean, if you borrow $100,000 at 8% and paid $8,000 in interest costs then that would mean you would have to make $8,000 on your $100,000 investment to break even, which is 8%…

Variable-rate mortgage holders received positive news on Wednesday as major lenders reduced their prime rate following the Bank of Canada’s rate cut earlier in the day.

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Is an upcoming mortgage renewal stressing you out? A recent survey by real estate brokerage Zolo found that just 3% of home owners “never worry” about being able to afford their mortgage when it comes time to renew. The rest aren’t so fortunate, with 79% of Canadians worrying about this sometimes, often or all the time.

It may hearten you to know that you likely have options. When it’s time to renew your mortgage, you can either stay with your current lender or shop around for a new one that offers a lower interest rate or different terms. Using a mortgage renewal calculator can help you compare mortgage offers and pick the best one available at the time of renewal. 

You’re 2 minutes away from getting the best mortgage rates in CanadaAnswer a few quick questions to get a personalized rate quote*I’m buying a homeI’m renewing/refinancingYou will be leaving MoneySense. Just close the tab to return.

Using a renewal calculator is one of the easiest ways to determine if your current mortgage is working for you or if it’s time to find one that better suits your needs…

The Bank of Canada just cut the overnight rate by another 0.25%. For the second consecutive month, they’ve lowered the rate. In total, a 0.50% drop in two months. (not enough, but it’s a start) Great news for anyone in a Variable rate mortgage. It means you will be paying 0.50% less on your mortgage. We can expect further cuts this year and next. Read on for more details.

And it’s also good news for those looking at fixed-rate mortgages. Fixed-rate shoppers will see some downward movement in the coming days and weeks. Important to remember, fixed rates are not directly impacted by the Bank of Canada rate. Fixed rates are directly tied to the Gov’t of Canada Bond Yields. They are indirectly affected by the Bank of Canada rate…more on this below.

THE BANK OF CANADA HAS SOUNDED THE ALARM.

At the July 24th Bank of Canada meeting, the BoC Governor Tiff Macklem said Canada’s economy is likely to grow by 1.5% but they also expect to see a 3% population growth…

Canadians are experiencing rate cut déjà vu today, as the Bank of Canada (BoC) slashed its trend-setting overnight lending rate by a quarter of a per cent. It’s the second rate cut in as many months from the central bank. It implemented its first on June 5, bringing an end to a prolonged, 11-month rate hold and officially putting Canada on track for lower borrowing costs.

What is the Bank of Canada’s interest rate?

This latest decrease brings the central bank’s rate—which sets the benchmark for Canada’s prime rate and variable-rate borrowing products—to 4.5%.Combined with last month’s decrease, the benchmark cost of borrowing in Canada is now down 0.5% and is at its lowest since May 2023.

What does the rate cut mean? Will the interest rate cuts continue?

In the immediate aftermath of today’s rate cut, Canada’s prime rate will decrease from 6.95% to 6.7%, with consumer lenders passing that discount onto their prime-based products, including variable mortgage rates and home equity lines of credit (HELOCs)…