Bank of Canada cuts interest rate to 4.25%

The Bank of Canada lowered its key interest rate to 4.25% on Wednesday, marking the third consecutive cut since June, in response to easing inflation.

Governor Tiff Macklem stated that while inflation pressures have softened, further rate cuts may be considered if inflation continues to decline as expected.

Though the 25-basis-point reduction was anticipated, some economists, like CIBC’s Avery Shenfeld, argue that larger cuts are needed to jump-start economic growth. The Bank’s previous cuts reduced the rate from 5% to 4.75% in June and 4.5% in July.

While economic growth reached 2.1% in the second quarter, unemployment remains high, particularly among youth and newcomers. Further rate cuts may come if inflation continues to drop, but for now, the Bank is taking a cautious, data-driven approach.

Impact of rate cut on Hosper Mortgage’s $50 million line of credit

• Lower borrowing costs: Hosper MIC’s $50MM line of credit operates on a 'floating rate',  which means that when interest rates drop, our borrowing costs also decrease. This creates a larger spread between our borrowing rate and the rate we charge our borrowers, leading to increased profits for our shareholders. 
• Enhanced profit margins: The reduced cost of debt will enhance Hosper’s profit margins. With lower interest payments, the net income from mortgage operations will increase. This surplus income is distributed to shareholders, leading to higher returns on their investments.
• Increased liquidity and flexibility:  The company can take advantage of quality deal flows without being overly constrained by capital costs. This ability to act on more profitable opportunities can quickly improve the overall performance of the MIC fund.
• Attracting more borrowers: Lower borrowing costs also mean that Hosper can offer more competitive rates to borrowers. This attractiveness can lead to an increase in the number of borrowers seeking private mortgage solutions from Hosper, thus growing the company's market share and further benefiting shareholders through increased revenue.
  To learn more about our $50MM line of credit, please read our detailed press release. 

This article references information from CBC, which you can read in full here. If you have any further questions, please use the contact form on the right to submit your query.