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 April 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, chat with a financial advisor about a Tax Free Savings Account or Retirement Savings Plan as your payments continue to remain low? Have you started your 2012 tax returns and are you getting 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 economic growth has evolved broadly as anticipated. In the United States, the economic expansion is continuing at a modest pace, with gradually strengthening private demand partly offset by accelerated fiscal consolidation. Significant policy stimulus has been introduced in Japan. Europe, in contrast, remains in recession, with economic activity constrained by fiscal austerity, low confidence and tight credit conditions.
Following a weak second half of 2012, growth in Canada is projected to regain some momentum through 2013 as net exports pick up and business investment returns to more solid growth. Consumer spending is expected to grow at a moderate pace over the projection horizon, while residential investment declines further from historically high levels. Growth in total household credit has slowed and the Bank continues to expect that the household debt-to-income ratio will stabilize near current levels.”
Based on this news and still 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 2.89% to 3.09% 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 May 29th, 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 is now 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.