TSX:AX.PR.E - Post Discussion
Post by
Torontojay on Jun 26, 2024 7:21am
Rate cuts
Are not helping Canadians that have negative amortized on their loans. In fact, Canadians on a fixed variable mortgage are paying exactly the same as before.
This is true for two reasons:
The first is that you're on a fixed payment so payments do not change even though the variable interest rate changes. The second is that if all of your payments are going to interest expense then your amortization period increases from say 25 years to potentially 40 years. When the BOC cuts interest rates, all that changes is the amortization or the number of years you have left to pay off your loan. Nothing else changes. You are still paying the exact same amount as you did before but instead of having 40 years left to pay, it gets reduced to maybe 35 years. In other words, BOC cuts is not helping Canadian homeowners as much as they'd have you believe. What it does accomplish is that it gives prospective homebuyers more buying power and that it reduces the financing costs for developers and home builders.
Anyway, this is my rant for the day.
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