December 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, December 6th, 2011, 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:
“Uncertainty around the global economic outlook has increased.  The recession in Europe is now expected to be more pronounced than the Bank had anticipated in October.  Recent economic data suggest that growth in the US has been slightly more robust than anticipated… Nonetheless, household deleveraging, fiscal consolidation and negative spillover effects from the European crisis are all expected to weigh on U.S. growth.  On balance, recent economic indicators in Canada suggest that growth in the second half of this year is slightly stronger than the Bank projected in October. The economy also continues to face competitiveness challenges, including the persistent strength of the Canadian dollar”.
The outlook hasn’t really changed that much since the last announcement… they expect that growth will slowly continue but will be impacted by global economic conditions.   Based on this repeated message, it is anticipated that prime rate might not actually increase until well into 2012 maybe even 2013.  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.

We have only seen some minor fluctuations to the fixed term rates since the last announcement and are still very low at around 3.29% to 3.79% for a five year fixed term.

Based on this recent announcement, and the anticipation that the prime rate will still remain low for the coming months, 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 January 17th, 2012 at which time I’ll be in touch again.

I wonder if I can ask a favour – rates are so low right now and so it is a great time to buy a 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.