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Money Markets of TorontoIn last October when The Bank of Canada decreased the lending rate by 0.5 per cent in October 2008 it raised turmoil in the money market. Other major banks also came under a tremendous pressure to follow its footsteps, and decrease their respective prime rates at least by the same percent age, if not more. This decade has witnessed a historic turn around with this economic crisis, especially in the real estate market being worst hit with the banking industry crashing. Banks have no choice but to finally settle for a lowered prime rate by 0.25 per cent. The reason being, the prime rate is an imperative benchmark that directly affects the variable rate of line of credit, mortgages and most business lendings. Most banks resisted the change for the current cost of borrowing funds is way higher than ever. The situation has come to a point where at the mutual level the banks are not willing to lend a decent amount to each other. The situation has become worse with the mortgage investors avoiding any risk, till they see the economy improving and getting stable. Per the past records and observations, the banks has been negotiating from 0.25, 0.50 to even 0.75 per cent off the prime rate when a mortgage borrower is ready to locks in the variable rate for a five-year term. The rough weather in the real estate market can be well-gauged by the smart strategies adopted by certain lenders quoting a variable rate at the prime of over or above 1.0 per cent. Thus, making it hard for the borrowers to go ahead with the deals. Well! if seen in light of the current economic situation, the lenders and investors are also not wrong. The wind is blowing in the opposite direction so they need to be playing it smart to be at gain. Even a few banks are also following the same strategy. In case your bank is playing the similar game, you need make a quick move by taking a mortgage of shorter term. This will resolve your current need for money. However, you will not be struck with the same prime rate when the economic scenario improve. Hopefully it will take a year or year and a half for the economy to restore back to normal. Though the government is giving full support but the regular economic cycle takes time to bring back the crest after a steep trough period. There had been a few rate sales where a borrower got 4.39 per cent after a two year closed mortgage. So, you be a wise speculator. |
| Date added: 2009-05-03 08:42:11 Hits: 19 |
