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 December 2nd, 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. So if you or anyone you know just got a little carried away and have some high interest credit card debt that you can’t seem to pay off in full each month, now is a great time to chat about options with rates so low. Maybe you are planning a renovation project soon or purchasing a second home or rental property – chat to me about your options so we can work on how much unnecessary interest we can save you but also get you closer to that Mortgage Burning Party! It’s never too late to start planning.
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:
“Global economic growth is evolving essentially as the Bank had anticipated in its October Monetary Policy Report (MPR). The US economy continues to grow at a solid pace, although private domestic demand has proven slightly less robust than expected. Meanwhile, commodity prices have declined further. The ongoing terms-of-trade adjustments and shifting growth prospects across different regions are contributing to exchange rate movements. In this context, policy divergence is expected to remain a prominent theme.
In Canada, the dynamics of growth have been broadly in line with the Bank’s MPR outlook. The economy continues to undergo a complex and lengthy adjustment to the decline in Canada’s terms of trade. This adjustment is being aided by the ongoing US recovery, a lower Canadian dollar and the Bank’s monetary policy easing this year. The resource sector is still contending with lower prices for commodities. In non-resource sectors, exports are picking up, particularly in exchange rate-sensitive categories. However, business investment continues to be weighed down by cuts in resource-sector spending. The labour market has been resilient at the national level, although with significant job losses in resource-producing regions. The Bank expects GDP growth to moderate in the fourth quarter of 2015 before moving to a rate above potential in 2016. While bond yields are slightly higher, financial conditions remain accommodative in Canada.”
The Bank of Canada has also indicated that as the inflation profile is in line with their target range. Remember that they will start increasing rates when they feel it necessary – so don’t become complacent or increase your personal spending unnecessarily unless you know you can afford it. 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 increased just a little since the last announcement, and are around 2.64% to 2.89% 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. I’ll be in touch again for the first announcement of 2016 on January 20, 2016.
I wonder if I can ask a favour, going with my theme of “Let the sun set and the leaves fall along with Canadian consumer debt with our help” 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. In either of these cases, would you mind passing my contact information on to them – this is very much appreciated.