Variable Rate Update Jan 2013

Good Afternoon,

As you know, your variable rate mortgage, line 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 10:00 am EST, Wednesday January 23rd, 2013, the Bank of Canada again did what we expected them to do… they continued to maintain their overnight rate.  What this means to you is that once again the prime rate on your mortgage, line of credit or student loan will not change and remains at 3.00%.

Great news also remember this is a great time to make the most of the low payments.   If you would like some ideas please let me know.

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

The economic expansion in the United States is continuing at a gradual pace, restrained by ongoing public and private deleveraging, global weakness and uncertainty related to fiscal negotiations.  Despite a marked improvement in peripheral sovereign debt markets, Europe remains in recession, with a somewhat more protracted downturn now expected than in October. Growth in China is improving, though economic activity has slowed further in some other major emerging economies. Supported by central bank actions and by positive policy developments in Europe, global financial conditions are more stimulative.  Commodity prices have remained at historically elevated levels, though temporary disruptions and persistent transportation bottlenecks have led to a record discount on Canadian heavy crude.  In Canada, the slowdown in the second half of 2012 was more pronounced than the Bank had anticipated, owing to weaker business investment and exports. Caution about high debt levels has begun to restrain household spending”

The Bank doesn’t expect the economy to reach full capacity until the second half of 2014.. much later than they projected.   Based on this, they are unlikely to increase their rate in the foreseeable future with any change most likely to occur possibly as late as Fall 2013 to early 2014!   Remember, that 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 March 6th, 2013 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 it is a great time for refinancing especially to consolidate high interest debt or buying an investment property, as I can hold rates for up to six months.  Even for those that are thinking of purchasing their first home this year, it is a perfect time to work with me to not only hold rates but also work on their action plan to make dreams of homeownership a reality!  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.

I’d like to take this opportunity to wish you and your family a very prosperous and happy 2013.