Variable Rate Update Jan 17, 2012

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, January 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 outlook for the global economy has deteriorated and uncertainty has increased… The Bank continues to assume that European authorities will implement sufficient measures to contain the crisis, although this assumption is clearly subject to downside risks. The Bank expects the U.S. recovery will proceed at a more modest pace going forward.  For Canada, net exports are expected to contribute little to growth, reflecting moderate foreign demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar.  In contrast, very favourable financing conditions are expected to buttress consumer spending and housing activity.

The outlook hasn’t really changed since the last announcement… they expect that growth will slowly continue but it is anticipated that prime rate might 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. We have seen fixed rates remain very low at 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 the coming months, unless you feel otherwise, I’d recommend that you remain with your current variable rate if you have a prime minus rate.  However, if having a fixed payment is important to you or you would like to take advantage of the low fixed mortgage rates, 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 March 8th, 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 with the holiday bills arriving so you can consolidate and save some money.   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.