By the numbers: How a Bank of Canada rate cut will affect mortgages and other debt payments

Many borrowers eagerly waiting on the Bank of Canada to start lowering interest rates will likely see savings of less than $100 after the first cut, according to a Globe and Mail analysis of common financial scenarios.

For Canadians contemplating taking out a mortgage or other debt with fixed interest rates, which remain constant throughout the loan term, any impact will depend on whether and how the central bank’s decision on Wednesday affects investors’ expectations, said James Laird, co-chief executive of financial products comparisons site Ratehub.ca and president of mortgage lender CanWise.

This borrower would see their $2,170 mortgage payment decline by $47 a month after a Bank of Canada cut, assuming they still have 23 years to fully pay off their mortgage, according to calculations by Ratehub. Now imagine a homeowner who must pay off $101,482 on their HELOC, equal to the average amount owed on those credit vehicles among borrowers who carry a balance, according to Equifax. Assuming an interest rate of 7.7 per cent, this borrower would see their $651-a-month minimum payment shrink by $21, The Globe calculated.

For those planning to take out or renew a mortgage with a fixed interest rate, Wednesday’s rate announcement will likely matter only if the Bank of Canada surprises financial markets, Mr. Laird said.

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