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 March 4th, 2015 the Bank of Canada maintained their overnight rate which in essence means no change to the interest rate on your variable rate mortgage, line of credit and/or student loans. Of course don’t forget that at the last announcement they did drop their rate by 0.25% BUT the drop on your interest rate was only 0.15%. This is still good news for the amount of interest that you will pay, but we also have to recognize that it is a reflection of the ailing economy. So let’s not forget that this is a great time to take advantage of such historical low rates and chat to a financial advisor about a Tax Free Savings Account or some RRSP contributions to trigger a potential income tax refund; you might have missed the RSP deadline for this year but it is never too late to start saving and planning for the future. If you don’t have a financial advisor, let me know and I’d be happy to recommend one to you.
On another note, are you carrying a balance on any lines of credit or credit cards right now where the interest rate is over 3%? If so, this is the perfect time to chat about a potential debt consolidation or refinance especially – let’s start saving you some unnecessary interest and getting to your mortgage burning party sooner! Maybe you are planning a renovation project soon or purchasing a second home or rental property – chat to me about your options … I’d be happy to make those plans into realty.
So to continue with the Bank of Canada news, here is an excerpt of the announcement and what they had to say about their decision today:
“The global economy is evolving broadly in line with projections… the US remains the main source of momentum in the global economy, while headwinds to growth linger in many regions. In this context, a growing number of central banks have taken actions to ease monetary conditions. Canadian economic growth in the fourth quarter of 2014 was consistent with the Bank’s expectations. The oil price shock had a modest early impact on aggregate demand, and a larger effect on income. The Bank continues to expect that most of the negative impact from lower oil prices will appear in the first half of 2015, although it may be even more front-loaded than projected in January. Nevertheless, data for 2014 as a whole suggest the anticipated rotation into stronger growth in non-energy exports and investment is well underway. Financial conditions in Canada have eased materially since January, in response to the Bank’s recent monetary policy action and to global financial developments. This easing is reflected across the yield curve and in a wide range of asset prices, including the Canadian dollar. These conditions will mitigate the negative effects of the oil price shock, further boosting growth through stronger non-energy exports and investment”
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 but in the meantime, interest rates will likely not start to increase until well into 2016. 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 since the last announcement and are around 2.89% to 2.99% 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 15, 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.