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Contest Winner, Rate Cut, and Other Good Reads – Jan 25, 2008

Contest Winner 

This past week we had a book giveaway with the prize being a free copy of "A Million Bucks by 30" by Alan Cory.  All entries were entered into a spreadsheet and a random number was generated.

Drumroll please… and the winner is: Brenna!

Congrats Brenna, I will be contacting you shortly for your shipping address. 

Interest Rates 

The biggest financial news this week has been the rate cuts from both the U.S and Canada.  After the world markets crashed on Monday past, the U.S federal reserve  held an emergency meeting an dropped their interest rate by 0.75% (the biggest single cut in over 2 decades).  The Canadian central bank cut their rate by 0.25%. 

As you may have read, there was some controversy as to whether the big banks would follow the central bank rate cut.  Never fret, the big banks have pulled through and have all dropped their prime lending rate to match the central bank rate drop.  That is great news for variable rate loan holders. 

On a side note, those of you getting new mortgages soon, to me it seems best to go with a variable rate mortgage.  With interest rates in a dropping environment and 5 yr fixed rates staying sky high relative to bond yields, it looks like variable will remain a better choice in the near future or at least until fixed mortgage rates start following the bond yields again.

Note that this is my opinion only and a mortgage specialist should be consulted before listening to my financial ramblings.

Other postings about the rate cuts around the blogosphere were made by Consumerism Commentary, Canadian Capitalist and Quest for Four Pillars.

Other Reads:

Have a great weekend!

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9 Comments

  1. Four Pillars on January 25, 2008 at 8:36 am

    Thanks for the link!

    Mike

  2. Silicon Prairie on January 25, 2008 at 12:52 pm

    If you expect fixed and variable mortgage rates to follow the same trend you could also go with a fixed mortgage and refinance if the rates drop far enough. There will be additional costs, but it might be a fair price for removing the exposure to potential rising interest rates in the future. I’d like to think that mortgage interest rates won’t go right back down again so soon after all that’s happened.

  3. ThickenMyWallet on January 25, 2008 at 1:01 pm

    Thanks for the link. I wonder how much pressure the Central Bank had to apply to the banks to follow suit? They were pretty instrumental in making sure the players cut a good deal on ABCP being traded and sold in Canada not to mention all their short term infusions of cash into the system.

  4. Canadian Capitalist on January 25, 2008 at 1:09 pm

    Thanks for the mention. With inflation muted and the Fed on an aggressive cutting schedule, I think there is a good chance that BoC will also cut rates further. (Though nothing is ever certain).

  5. FinancialJungle on January 25, 2008 at 1:10 pm

    Thanks for the link, FT.

  6. Gates VP on January 25, 2008 at 1:20 pm

    What? The Bank of Canada dropped their rate too?

    Hmmm… I’m the US right now, so I don’t get to hear any of this news, but CNN has “fear” and “panic” and “recession” pretty much pasted across the headlines. Unsurprisingly, I’ve heard nothing of Canada’s move.

    But I am surprised, clearly, the banks are a little more bullish than the bank of Canada. And I’ll side with the banks on this one.

    I’m living here in Kansas City and inflation is pretty evident just from talking to people. Of course, the debt numbers are also really evident. What’s not evident is how Canada is experiencing the same factors. It’s like the US dropped interest rates to fuel growth and stimulate the economy, and Canada just dropped the rates “just because”.

    Does anyone have a really good reason for the Canadian rate drop?

  7. FrugalTrader on January 25, 2008 at 2:25 pm

    Gates, I think the BOC dropped rates to calm and markets along with trying to nip the recession threat in the bud. The rumour is that the BOC will drop another quarter point this year.

  8. Jennifer in OR on January 25, 2008 at 6:26 pm

    Thanks for the link back to the Carnival of Family Life. Also, I was interested to read your opinion on new mortgages, as my husband and I will be in that boat shortly.

  9. lena the thinker on February 9, 2008 at 12:51 pm

    Congratulations to the winner!

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