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 January 21st, 2015 the Bank of Canada DROPPED their overnight rate by 0.25% – typically when this happens the banks will drop their prime rate – we will find out later today if this occurs and if it does it will result in the prime rate going to 2.75% and therefore dropping the interest for you as well! This is great news for you but it is unfortunately a reflection of the economic instability at this time.
Have you chatted to a financial advisor about a Tax Free Savings Account or some RRSP contributions to trigger a potential income tax refund this year as your payments continue to remain low and potentially even drop? If you don’t have a financial advisor, let me know and I’d be happy to recommend one to you. On another note, now that the credit card statements are starting to arrive, if you or anyone you know just got a little carried away and have some high interest credit card debt that they can’t seem to pay off in full each month, now is a great time to chat about options with rates so low. Let’s budget and plan together – maybe you are planning a renovation project soon or purchasing a second home or rental property – chat to me about your options ….it’s never too late to start planning.
Even though there is uncertainty of the economic outlook at this time, the bank did remind us that when the economy continues on a more upward direction and sustainable long term, rates will rise. 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 have actually dropped slightly since the last announcement and are 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 March 4, 2015 at which time I’ll be in touch again.
I wonder if I can ask a favour, if you hear a friend or family member talk about going thru a financially tough time – maybe I can help with some budgeting, credit counselling and debt consolidation options for them. It is also that time of year that many think about what they want to accomplish this year – if buying their first home is on the “wish list”, would you mind passing my contact information on to them – this is very much appreciated.