October Variable Rate Update

Good morning

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 update from me on the recent Bank of Canada announcement.

At 9:00 am EST, Tuesday October 23rd, 2012, the Bank of Canada again did what we expected them to do… they maintained their overnight rate.  What this means is that your mortgage, line of credit or student loan will not change and prime 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.  Don’t forget as always, I recommend you chat with a financial advisor about a Tax Free Savings Account or some RRSP contributions to trigger a potential income tax refund next year as your payments continue to remain low!  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: The global economy has unfolded broadly as the Bank projected… “The economic expansion in the United States is progressing at a gradual pace. Europe is in recession and recent indicators point to a continued contraction. In China and other major emerging economies, growth has slowed somewhat more than expected, though there are signs of stabilization around current growth rates. Notwithstanding the slowdown in global economic activity, prices for oil and other commodities produced in Canada have, on average, increased in recent months.  Global financial conditions have improved, supported by aggressive policy actions of major central banks, but sentiment remains fragile.  In Canada, while global headwinds continue to restrain economic activity, domestic factors are supporting a moderate expansion”

The overall economic growth in Canada is expected to pick up and return to full capacity by the end of 2013.   Based on this outlook, the bank has indicated they are unlikely to increase their rate in the foreseeable future although very much dependent on the continued trend.  A change is likely to occur sometime in 2013 but remember any increase to the prime rate since 1992 has only been by 0.25% at any ONE time, so you won’t see a large significant increase all at once.

Fixed rates haven’t changed much at all since the last announcement, at around 3.04% to 3.29% 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 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 December 4th, 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 refinancing, first time homebuyers or buying an investment property 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.

Yours truly