01/21/2015 12:09 EST | Updated 03/23/2015 05:59 EDT

BoC's Sudden Interest Rate Cut Means Lower Mortgage Rates, More Borrowing

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TORONTO - Economists say Canadian borrowers can expect as mortgage rates to dip slightly in response to the Bank of Canada's surprise move to cut its trend-setting interest rate.

The central bank lowered its benchmark interest rate to 0.75 per cent, from one per cent, on Wednesday to soften the blow of dropping oil prices on the Canadian economy.

CIBC chief economist Avery Shenfeld says that will likely mean a corresponding 0.25 drop in variable, or floating, mortgage rates.

Fixed-rate mortgages are also likely to see a slight decline, as they follow bond yields, which will move lower in response to the central bank's rate cut.

TD economist Craig Alexander says lower interest rates could spur consumers in non-oil dependent provinces such as Ontario to take on more debt, which in turn will boost the region's red-hot real estate market.

However, Alexander says it's unlikely that consumers in oil-rich Alberta, who are reeling from the impacts of the sharp decline in energy prices, will increase their debt loads or see sales or prices of homes heat up.

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