What the overnight reduction means for Mortgagees

This is good news for those holding variable rate mortgages. Their effective rate of interest can be considerably low based on previous rate offerings, in variable products, of discounts from .25 to a full 1.00 percent off of prime.

Today's benefits seem not as valuable, as lenders will only entertain mortgage offerings at prime plus 1.00 to 2.00%. Although seemingly not as good, fixed rates remain higher and it is unknown if they will continue to rise. The economic crisis experienced globally is creating an unstable market. Other factors effecting fixed rate terms may also include that fact that Canadian banks who invested in US mortgage paper are out to recover their losses, the cost of money to loan out in mortgages, based on the cost of 5 year bonds, is high.

With these factors in mind the government is creating security for lenders who were entering into a credit crunch and not willing to lend out their money to each other, which is good news. The government is putting out money into term pra's and offering additional security for mortgagors by guaranteeing additional mortgages. This should ease up restrictions in mortgage lending and keep opportunities available for those needing to refinance or purchase a home.

What type of mortgage - fixed or variable?- The decision still sits with your comfort level.