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Monthly Archives: April 2014

Bank of Canada Announcement, How will it affect you?

As you know, your variable rate mortgage, line of credit and/or student loans are all based
on the Prime Rate and 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 16th, 2014 the Bank of Canada again did what we
expected them to do … they continue 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 is fabulous news but are you still making the most of the low
payments you still have, as the rate will increase in the future. No doubt you are getting ready
to file youe 2013 Income Tax Return, or maybe you have already done so – are you expecting
a refund? Give me a call and we can chat about helping you make the most of that refund and
the savings you continue to make on your mortgage – I have some great budgeting and savings
strategies for you. Alternatively, if you owe Revenue Canada, I can help as well by potentially
accessing a line of credit or the equity in your home to get them paid off as soon as possible to
avoid their high interest costs and penalties – let me know as I would be happy to assist either
way.
Here is an excerpt of the announcement from the Bank of Canada and what they had to say
about their decision today:
“Inflation in Canada remains low due to the effects of economic slack and heightened retail
competition. However, higher consumer energy prices and the lower Canadian dollar will exert
temporary upward pressure on total inflation. The global economic expansion is expected to
strengthen over the next three years as headwinds that have been restraining activity dissipate.
The economic recovery in the US appears to be on track, despite soft readings in the last few
months largely due to unusual weather. Europe’s economy is growing modestly, but inflation
remains too low and the nascent recovery could be undermined by risks emanating from the
Russia-Ukraine situation. In China and other emerging-market economies growth is expected to
be solid, although there are growing concerns about financial vulnerabilities.
Competitiveness challenges continue to weigh on Canadian exporters’ ability to benefit from
stronger growth abroad. However, a range of export subsectors have been growing in line with
fundamentals, which suggests that as the U.S. recovery gathers momentum and becomes
more broadly-based, many of our exports will benefit. The lower Canadian dollar should provide
additional support. We continue to believe that rising global demand for Canadian goods and
services, combined with the assumed high level of oil prices, will stimulate business investment
in Canada and shift the economy to a more sustainable growth track.”
Just as before, the Bank still does not expect to increase their rate in the foreseeable future with
any change most likely now not to occur until well into 2015! They continue to wait and see
economic growth continue on a more upward direction and become more sustainable long term.
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 dropped just slightly since the last announcement to 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 June 4th, 2014 at which time I’ll be in touch again.
I wonder if I can ask a favour – this is a great time for first time home buyers who are thinking
of purchasing in the Spring to start with a pre-approval plan now to get them on track and
save unnecessary interest. We have seen some changes to mortgage qualifying including
increases the default insurance premiums effective May 1st, if you have less than 20% down
payment. It is advisable to start planning ahead and would be happy to provide an idea of
closing costs and monthly budget payments to start those that you know on the path to home
ownership. Also if you hear a friend or family member talk about going thru a financially tough
time – maybe I can help with some budgeting and debt consolidation options for them. In either
of these cases, would you mind passing my contact information on to them – this is very much
appreciated
Yours truly,

Eva Neufeld