Variable Rate Update July 17, 2013

Good morning,

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 July 17th, 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:

Global economic growth remains modest, although the pace of economic activity varies significantly across the major economies. The U.S. economic expansion is proceeding at a moderate pace, with the continued strengthening in private demand being partly offset by the impact of fiscal consolidation. The global economy is still expected to pick up in 2014 and 2015.

In Canada, economic growth is expected to be choppy in the near term, owing to unusual temporary factors, although the overall outlook is little changed from the Bank’s early projections.  Despite ongoing competitiveness challenges, exports are projected to gather momentum, which should boost confidence and lead to increasingly solid growth in business investment. The economy will also be supported by continued growth in consumer spending, while further modest declines in residential investment are expected.

Based on this news and the somewhat stagnant and muted outlook for inflation, the Bank does not expect to increase their rate in the foreseeable future with any change most likely to occur not until maybe 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 have gone up as the bond market has rallied over the last few weeks, at around 3.39% to 3.59% 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 September 4th, 2013 at which time I’ll be in touch again.

I wonder if I can ask a favour – rates are still very low and it is a great time for first time home buyers and those looking to purchase an investment property.   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.