What does it mean?
If wholesale rates go down, it’s cheaper for the banks to lend to us. So, they usually lower their interest rates.
If the wholesale rates go up, they put their rates up too.
That’s what usually happens.
Will interest rates go up?
Thankfully, interest rates probably won’t go up this time.
It all comes down to what I discussed in last week’s Private Property.
The banks have been discounting their interest rates in private.
Although most banks will say their 1-year rate is 7.35%, once you get a mortgage, you can negotiate this down.
On average, our mortgage brokers have been negotiating 0.43% off the 1-year rate. That's a savings of $41 a week on a $500,000 mortgage.
These discounts were available because the wholesale rates fell in December and January.
But the banks didn’t lower their interest rates.
They gave discounts instead. That decision now looks smart.
Because the banks likely won’t change the advertised rates despite their higher costs.