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 March 6th, 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, chat with a financial advisor about a Tax Free Savings Account or Retirement Savings Plan as your payments continue to remain low? Especially if you have started your 2012 tax returns and you think you will get a refund or credit back, it might be a good time for us to chat about whether to pay down your mortgage to get closer to that Mortgage Burning Party date or invest the funds elsewhere. 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:
“Global financial conditions remain stimulative, despite recent volatility. In the US, the economic expansion is continuing at a gradual pace and private sector demand is gaining momentum. The recession in Europe continues and growth in China has improved. Canada’s economy grew by 0.6 per cent at annual rates in the fourth quarter of 2012. The Bank expects growth in Canada to pick up through 2013, supported by modest growth in household spending combined with a recovery in exports and solid business investment. Weaker core inflation and lower mortgage interest costs, were only partially offset by higher gasoline prices. Low core inflation reflects muted price pressures across a wide range of goods and services, consistent with material excess capacity in the economy”.
Based on this news and the continued 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 Fall 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 2.99% to 3.19% 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 April 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 the Spring market will be soon upon us and it is a great time for first time home buyers to start considering their options. 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.
Mortgage Tailors Inc.