Variable Rate Update May 29 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 May 29th, 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%.  This of course is fabulous news but as always, I like to remind you to make the most of the low payments you still have as the rate will increase in the future.  If you haven’t done so already, give me a call and we can chat about helping you get set up with a great GIC, Tax Free Savings Account or Retirement Savings Plan as your payments continue to remain low.    Maybe you are thinking of saving for a special occasion or expect a large expenditure in the near future (car, college/university, cottage or investment property purchase), and would like to chat about some budgeting and saving strategies – let me know as I would be happy to assist.

Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision:
“In the United States, the economic expansion is progressing at a modest pace, with continued strengthening in private demand partly offset by fiscal consolidation. Japan’s economy is beginning to respond to significant policy stimulus. Europe, in contrast, remains in recession. Growth in China has continued to ease from very strong rates, weighing somewhat on global commodity prices.

In Canada, recent economic indicators suggest that growth in the first quarter was stronger than the Bank projected in April. For the year as a whole, growth is expected to remain broadly in line with the Bank’s forecast. Over the projection horizon, consumer spending is expected to grow at a moderate pace, business investment to grow solidly, and residential investment to decline further from historically high levels. Growth in total household credit is slowing and the Bank continues to expect that the household debt-to-income ratio will stabilize near current levels. Exports are projected to continue to recover, but to be restrained by subdued foreign demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar.”

Based on this news and still the ongoing slack in the Canadian economy and the muted outlook for inflation, the Bank does not expect to increase their rate in the foreseeable future with any change most likely to occur possibly as late as late 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 at all since the last announcement, at around 2.89% to 3.09% 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 July 17th, 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 we are well into the Spring market and it is a great time for first time home buyers and those planning their University or college accommodation to start considering their options.  Do you have a friend, family member or colleague that is looking at University College for their son and daughter and might want to chat about purchasing a property rather than renting with as little as 5% down payment?   It is a perfect time to work with me to not only hold rates for up to four months while they go house hunting 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.

Yours truly,