Variable Rate Update September 2012


As promised, here is your personal update from me on the recent Bank of Canada announcement.

At 9:00 am EST, Wednesday September 5th, 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.

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 continues at a gradual pace. Europe is in recession and its crisis, while contained, remains acute. In China and other major emerging economies, growth is decelerating somewhat more quickly than expected from previously-rapid rates, reflecting past policy tightening, weaker external demand, and the challenges of rebalancing towards domestic sources of growth. Notwithstanding the slower global momentum, prices for oil and other commodities produced by Canada have, on average, increased since July.  In Canada, while global headwinds continue to restrain economic activity, underlying momentum remains at a pace roughly in line with the economy’s production potential.”

The overall economic growth in Canada is expected to pick up through 2013 and there are tentative signs of slowing in household spending which the Bank is in favour of.  Based on this outlook, they have indicated they are unlikely to increase their rate in the foreseeable future although very much dependent on the continued trend.  A change is likely to occur in 2013, and it is expected to be gradual and controlled in line with economic recovery, both in Canada and globally.  Remember any increase to the prime rate since 1992 has only been by 0.25% at any ONE time.

Fixed rates haven’t changed much at all since the last announcement, at around 2.99% to 3.39% 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 very much 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 23, 2012 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 so it is a great time for first time homebuyers, buying an investment property or consider refinancing especially as 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.

On a side note, there are some mortgage legislation changes coming into effect in the fall which impact secured lines of credit.  They will be limited to a maximum of 65% of the value of your property which is lower than the current maximum of 80%.  Therefore if you are thinking of taking out some equity in your home and a line of credit is something you are considering, call me now so we can chat before the changes come into place and your options may diminish.   Don’t forget to share this with your friends, family and colleagues.