What Lending Rate Cut Means For Your Mortgage

On Tuesday, the Bank of Canada cut its key lending rate by half a percentage point, the biggest cut in six years.

For those looking to buy a house, that decision is a big influence on what kind of mortgage to chose.

"We're in a variable mortgage right now," says homeowner Dan Davies. But that might not last long.

"We're considering dropping it. A half a percent is a big drop so it's a lot of money to be saving."

There are other factors that influence his decision, like a new baby. "The fewer variables in my life, the better, especially with this guy around," Davies jokes.

However, that may not be the case for everyone.

"For that first-time purchasing a home, obviously the fixed rate is going to be the best solution," points out Kathy Ellis, a spokesperson for RBC.

"If you're somebody who's a more experienced purchaser, who may be a second or third time homeowner, they may want to float with a variable rate."

The key interest rate of 3.5% is the bank's way of boosting the housing market. An RBC survey found that there's a big drop in people looking to buy real estate.

"There is a slowdown. There's no question about that," admits Ellis. "But their intentions of our respondents are still very positive."

Many Canadians still believe real estate is a good investment, and their confidence may get another boost soon: The Bank of Canada has hinted that further cuts to its overnight rate may come at its next scheduled meeting on April 22.

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