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 July 15th, 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 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.
So summer looks like it is finally in full swing; are you thinking of some renovations or consolidating some debts that don’t seem to be going away anytime soon! It is never too late, or early, to start planning for the future especially as rates are still at historical lows! Chat to me about your options … I’d be happy to make those plans into reality and save unnecessary interest along the way.
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 Bank’s estimate of growth in Canada in 2015 has been marked down considerably from its April projection. The downward revision reflects further downgrades of business investment plans in the energy sector, as well as weaker-than-expected exports of non-energy commodities and non-commodities. Real GDP is now projected to have contracted modestly in the first half of the year, resulting in higher excess capacity and additional downward pressure on inflation.
The Bank expects growth to resume in the third quarter and begin to exceed potential again in the fourth quarter, led by the non-resource sectors of Canada’s economy. Outside the energy-producing regions, consumer confidence remains high and labour markets continue to improve. This will support consumption, which will also receive a fiscal boost. Recent evidence suggests a pickup in activity and rising capacity pressures among manufacturers, particularly those exporters that are most sensitive to movements in the Canadian dollar. Financial conditions for households and businesses remain very stimulative.”
Even though there is still some uncertainty of the economic outlook, the bank did remind us that they will assess the net effect of these recent positive developments to determine when rates will rise. Even with this information, 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 maintained the same since the last announcement, and are around 2.79% to 2.84% 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 September 9, 2015 at which time I’ll be in touch again.
I wonder if I can ask a favour, you might know someone who is unfortunately having a tough time right now with maybe too much debt or recent loss of income. There are many options to help using debt consolidation or access to some funds to get thru the tough times using the equity in their home. I have found recently that my access to alternative funds has been able to help many who are in transition and just need enough money to get them thru a tough time like finding a new job and keeping above water in the meantime. Don’t hesitate to ask them to reach out to me – I can provide a pro bono consultation to get them thru this.