Understanding Interest Rates

Buying a home is usually the biggest financial transaction most of us will make in our life. Therefore shouldn't you understand the financing process and what causes interest rates to move up and down? I am going to attempt to shed a little light on the subject and hopefully after you spend the next couple of minutes reading this post you will be much better informed. Like most people who own a property or are thinking of purchasing a property, you have been watching interest rates closely over the last few months. You have also probably noticed that the governments prime rate has been falling steadily in Canada. So how does this translate into the rate you are going to pay for your mortgage? It turns out the correlation is not as direct as you might think. The first point I want to stress is the banks do not finance your mortgage by borrowing money from the government. Therefore the government's prime lending rate does not have a direct impact on your mortgage. Mortgages (variable and fixed) are financed through the banks' deposits. This is where the banks get all of the ...