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 12, 2017, the Bank of Canada held it’s prime lending rate. So let’s not forget that this is a great time to take advantage of such historical low rates. As the weather warms up you might be thinking of
Accessing the equity in your home for some renovations especially if you have noticed a significant increase in house values in your area based on the Spring market!
Moving this year (downsizing or upsizing) and need to understand your financing options
Taking advantage of the low interest rates and purchasing a cottage, rental property or somewhere for a family member to live in (for University, College or keeping aging family closer to you).
Let’s chat about your options – it is never too late, or early, to start planning especially as it has been proven that real estate is an amazing long term investment! Chat to me about your options … I’d be happy to make those plans into realty.
To continue with the Bank of Canada news, here is an excerpt of the announcement and what they had to say about their decision:
“Global economic growth is strengthening and becoming more broadly-based than the Bank had expected … although there is still considerable uncertainty about the outlook. In the US, some temporary factors weighed on economic activity in the first quarter but the drivers of growth remain solid. The US is close to full employment, unlike many other advanced economies, including Canada, where material slack remains. Global financial conditions remain accommodative.
In Canada, recent data indicate that economic growth has been faster than was expected… Growth was temporarily boosted by a resumption of spending in the oil and gas sector and the effects of the Canada Child Benefit on consumer spending. Residential investment has also been stronger than expected. Employment data have been robust, although gains in hours worked are still soft. Meanwhile, export growth has been uneven in the face of ongoing competitiveness challenges. Further, despite a recent uptick in sentiment, business investment remains well below what could be expected at this stage in the recovery. Accordingly, while the recent rebound in GDP is encouraging, it is too early to conclude that the economy is on a sustainable growth path.”
The Bank acknowledges the strength of recent data, some of which is temporary, and is mindful of the significant uncertainties weighing on the overall economic outlook; So it looks like it is still anticipated that prime rates won’t start increasing until well into 2017 but we are being given the heads up that they will start increasing eventually. 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.
Interest rates have changed slightly;
- Fixed rates have gone down a bit at 54% to 2.79%
- The discount on the variable rate has improved with as low as prime minus 0.65% to 0.70% so 05% to 2.00%. If your interest rate is higher than this on your variable it might be worth us revisiting to see if we can make some changes and save you unnecessary interest.
Also, remember that the prime rates and fixed term rates are impacted by two different sets of economic drivers and so increases in fixed rates doesn’t always mean the same increase in prime rates and vice versa.
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 still 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 next announcement on May 24, 2017.
I wonder if I can ask a favour; It is 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. With all the hot markets out there now, and changes to mortgage legislation, there is a lot of confusion especially amongst our first time home buyers and my specialty is walking them thru the steps with ease! This is very much appreciated.