Good times for Vancouver mortgage shoppers

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Here’s some good news for Vancouver mortgage holders and those shopping around for a new home. Earlier this year, the Bank of Canada lowered its key interest rate by 0.25% – but what’s all the fuss? We’ll dig into it, but first, since we’re going to be knee-deep in financial jargon, let’s define a few relevant terms right off the top.

  • Key interest rate: The interest rate at which banks and lenders can borrow money from the federal bank, in our case, the Bank of Canada. Also referred to as “the overnight rate.”
  • Prime lending rate: The interest rate at which banks lend money to their most trusted or secure customers on short-term loans.
  • Variable mortgage: A mortgage where the monthly payments stay the same, but the interest rate applied to the mortgage can fluctuate periodically.
  • Fixed mortgage: A mortgage where the monthly payments and interest rate remain the same for the duration of the term.
  • Vancouver: A city where it has proved difficult to afford the purchase of a new home.

So, how does the key interest rate affect mortgage rates? Well, if the Bank of Canada drops the key interest rate, the lenders (banks, credit unions, etc.) will usually follow suit and lower their prime lending rates.

In essence, any change to the key interest rate has an immediate effect on the rates of certain products offered by those lenders, such as variable mortgages and lines of credit.

And yes, it’s important to note that the changes will affect holders of variable mortgages, but not those with fixed mortgages. The interest rates associated with variable mortgages can fluctuate with the rise and fall of the lending rate, but fixed mortgage interest rates remain, you guessed it, fixed.

Here’s another way that the 0.25% drop is benefitting prospective homebuyers and mortgage shoppers: it has created serious competition between the lenders. Banks and credit unions are offering up some attractive incentives to entice potential customers.


As an example, Prospera Credit Union is offering up to $1,000 to help cover new mortgage costs or renewals. They also offer automatic qualification for a $5,000 line of credit. These incentives are called “Prospera Perks,” and they’re part of Prospera’s MyStyle Mortgage offer. Couple this with the already competitive mortgage rates Prospera offers and you’re looking at a pretty inviting deal.

As always, shop around and take a good look at a selection of packages before making your choice. And don’t forget to keep your eye on that key interest rate.

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