April Variable Rate Update

April Variable Rate Update

As you know, your variable rate mortgage, lines of credit and/or student loans are all based on the Prime Rate and as promised, here is your personal update from me on the recent Bank of Canada announcement on changes to their Overnight Rate which in most cases impacts your Prime Rate.

At 9:00 am EST, Tuesday April 17th, 2012, the Bank of Canada again did what we expected them to do… they maintained their overnight rate.  What this means to you is that the prime rate on your mortgage or line of credit will not change and remains at 3.00%.  This is great news as you still have a great low rate and so continue to make the most of the low payments you will still have and maybe chat with a financial advisor about a Tax Free Savings Account or some RRSP contributions to trigger a potential income tax refund next year!  If you don’t have a financial advisor, let me know and I’d be happy to recommend one to you.

Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision:

The profile for global economic growth has improved since the Bank released its January Monetary Policy Report.  In particular, the international price of oil has risen further and is now considerably higher than that received by Canadian producers.  If sustained, these oil price developments could dampen the improvement in economic momentum. The external headwinds facing Canada have abated somewhat, with the U.S. recovery more resilient and financial conditions more supportive than previously anticipated.  As a result, business and household confidence are improving faster than forecast in January.   The Bank projects that private domestic demand will account for almost all of Canada’s economic growth over the projection horizon.   The recovery in net exports is likely to remain weak in light of modest external demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar.”

The overall economic momentum in Canada is slightly better than expected and the Bank expects that growth will slowly continue.  Based on their slightly more positive outlook, they have indicated they may start to increase their rate in the foreseeable future although very much dependent on the continued trend.  This change may occur late 2012 at the earliest based on today’s announcement.  When it does start to increase, it is expected to be gradual and controlled in line with economic recovery, both in Canada and globally.  Remember any change to the prime rate since 1992 has only been by 0.25% at any ONE time.

Fixed rates have changed only slightly at around 3.29% to 3.49% for a five year fixed term.

Based on this recent announcement, and the anticipation that the prime rate will still remain low for a while now, unless you feel otherwise, I’d recommend that you remain with your current variable rate product as the interest is very much lower than a fixed term rate right now.  However, if having a fixed payment is important to you, call me so I can calculate what your new payment would look like and also if it is suitable for you. The next announcement on any change to the prime rate is June 5th, 2012 at which time I’ll be in touch again.

I wonder if I can ask a favour – rates are still so low right now and so it is a great time for first time homebuyers, buying an investment property or consider refinancing especially as I can hold rates for up to six months, if you know of someone that is looking for advice on their mortgage options, with no obligation, would you mind passing my contact information on to them – this is very much appreciated.  Also, if you know anyone renewing their mortgage please pass my name on to them.