Variable Rate Update, Sept 4, 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 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 September 4th, 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%… a recurring theme as you can tell.  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 ratewill 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:

The global economy continues to expand broadly as expected, but its dynamic has moderated. In the US, the process of normalization of long-term interest rates has begun in the context of stronger private domestic demand. Recent data, however, point to slightly less momentum overall than anticipated. In Europe, there are early signs of a recovery, and Japan’s situation remains promising. In a number of emerging market economies, financial volatility has increased, adding uncertainty to growth prospects, although China continues to grow at a solid pace. Commodity prices have been relatively stable, with geopolitical stresses putting some upward pressure on global oil prices.

Uncertain global economic conditions appear to be delaying the anticipated rotation of demand in Canada towards exports and investment. While the housing sector has been slightly stronger than anticipated, household credit growth has continued to slow and mortgage interest rates are higher”

Based on this news and the continued subdued inflation, the Bank does not expect to increase their rate in the foreseeable future with any change most likely to occur well into 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 have gone as the bond market has rallied over the last few weeks, at around 3.49% to 3.69% 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 October 23rd, 2013 at which time I’ll be in touch again.

I wonder if I can ask a favour – despite rates going up a little, they are still very low and and it is a great time for home owners that have significant high interest credit card or other debt to consider their options for refinancing.   If you know of someone that is looking for advice on their mortgage options and strategies on how to save unnecessary interest, would you mind passing my contact information on to them – this is very much appreciated.