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, Thursday March 8th, 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 heightened uncertainty around the global economic outlook has decreased in the weeks since the last announcement. With tentative signs of stabilisation in European bank funding and sovereign debt markets, conditions in global financial markets have improved and risk aversion has decreased. However, the global economy is still expected to grow below its trend rate as the deleveraging process in advanced economies proceeds. The U.S. expansion is proceeding at a modest pace, reinforced by recent improvements in the labour market. Commodity prices are higher than anticipated, supported by improved global economic conditions and a geo-political risk premium on oil. If sustained, the latter could ultimately dampen the improvement in global economic momentum.”
The outlook actually appears to have improved slightly since the last announcement… however, they expect that growth will still slowly continue but it is anticipated that prime rate might still not actually increase until into 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.
Fixed rates remain at the same levels around 3.19% 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 if you are prime minus. 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 April 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.