Why is my Mortgagor so Nice?

In My Humble Opinion
1

Back in May, I asked the Teeming Millions for advice on going for a variable rate mortgage renewal.

Well I went for it at 4.25 %
For the past several months I noticed that the on-line rate on the 5 Year Open Variable Interest Rate Mortgage went up. Damn. According to the link I provided in the other thread, it has settled for now at 5%.

But just now I got a letter from my mortgagor that as of November my rate is now 3.5 %

I’m thrilled ! The fundamentals of the economy are sound ! :smiley:

But I’m left with the burning question. Why would they give me such a break ? :dubious:

2

I noticed the interest on my HELOC has dropped too. I think it has something to do with the Fed cutting the prime interest rate.

3

[nitpick]It’s mortgagee[/nitpick]

4

Presumably, someone paying 95% if their previous mortgage payments beats not receiving any at all, PLUS, having yet another property to deal with.

But I’m just shootin’ from the hip here.

5

I got a similar letter. Since I have a little bank in a really tiny town, and am in full-on-freak-out-mode about our immediate future, I called Mr. Little Bank President’s wife. She says, and I quote, “the bank is lowering rates for people who pay their bills of because the bail out to make everyone calm down.”

YMMV, and it would help me to have an exciting christmas cookie recipe handy to get a coherent answer.

So, what’s your secret for amazing Snickerdoodles? :rolleyes:

6

Damn you, Gfactor, for scooping my nitpick!
:stuck_out_tongue:

7

:o

8

Your HELOC is probably tied to the Prime rate, which is based on the Fed Overnight lending rate. Your credit agreement will specify how often the rate changes (daily/monthly/quarterly/annually) and what the index is based on as well as the margin.

9

The Flying Dutchman is posting from Canada, so I don’t think this explanation works. What would the equivalent be for Canada?

10

I don’t know how they do it in Canada, but in Australia the Federal Reserve Bank sets the standard interest rate, which goes up and down every so often. Mortgagee banks don’t have to change their variable rate mortgages when the Official Interest Rate changes, but they are under intense political pressure to do so, or look like greedy robber barons

(besides which, if they don’t pass on rate cuts as well as rate increases, then nobody would ever want to take out a variable rate home loan, so why bother with them?)

11

What, exactly, is your rate indexed to? I seriously doubt that the holder of your mortgage is reducing your rate based on anything other than the movement of that index.