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 9:00 am EST, Tuesday December 4th, 2012, 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 don’t forget to make the most of the low payments you still have as the rate will increase in the future. I recommend you chat with a financial advisor about a Tax Free Savings Account or some RRSP contributions to trigger a potential income tax refund next year as your payments continue to remain low! If you don’t have a financial advisor, let me know and I’d be happy to recommend one to you.
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 progressing at a gradual pace and is being held back by uncertainty related to the fiscal cliff. Europe remains in recession, Chinese growth appears to be stabilizing and global financial conditions remain stimulative, though vulnerable to major shocks from the U.S. or Europe. In Canada, economic activity in the third quarter was weak, owing in part to transitory disruptions in the energy sector… the pace of economic growth is expected to pick up through 2013. The expansion is expected to be driven mainly by growth in consumption and business investment, reflecting very stimulative domestic financial conditions.”
Even though Canada’s economy was slower than expected in the last quarter, the bank still expects it to pick up momentum in 2013. They are unlikely to increase their rate in the foreseeable future with any change most likely to occur sometime in mid to late 2013. 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 3.19% 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 January 23rd, 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. 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 happy holiday and extremely prosperous 2013.