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. To everyone’s surprise, the Bank of Canada has increased their Overnight Rate by 0.25%. When this happens, it typically means that your Prime Rate is going to increase as well but not always by the same amount. It can also mean that not every lender will adjust their prime rate the same way. Keep an eye out later today for further updates on your specific lenders’ prime rate.
Recent economic data has been stronger than expected hence a surprise to see the Bank increase their rate again so quickly; we haven’t seen that in over 10 years! You have to admit that we have had it good for a long time and we can still continue to benefit from low rates and don’t panic!
We have seen two increases in the last three months, and even though it is only 0.25%, this second increase may start to impact your monthly budgeting and cash flow. Fixed term interest rates are still super low with five-year fixed rates in the 2.99% to 3.09% range. If the net interest rate on your current variable is the same as or higher than the current fixed term rates right now, even though the prime rate will still remain low for a while now, it might be time to chat about your options including potentially converting to a fixed term. Converting to a fixed term isn’t right for everyone as other factors are to be taken into consideration such as payment change, income and future plans such as renovating, moving etc. Call me so I can calculate what your new payment would look like and also if it is suitable for you.
Have you really made the most of the low payments you have had? How much do you have saved up or how closer are you to your mortgage burning party because you have made extra payments on your mortgage? Or maybe you 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.
Don’t worry, if you aren’t as far ahead as you would like to be, we can work together to create a plan to get you back on track… so back to school isn’t just for the kids…us adults can benefit from going to back to the drawing board with our finances, savings and future financial wealth goals.
To continue with the Bank of Canada news, here is an excerpt of the announcement and what they had to say about their decision:
“Recent economic data have been stronger than expected, supporting the Bank’s view that growth in Canada is becoming more broadly-based and self-sustaining. Consumer spending remains robust, underpinned by continued solid employment and income growth. There has also been more widespread strength in business investment and in exports. Meanwhile, the housing sector appears to be cooling in some markets in response to recent changes in tax and housing finance policies… the level of GDP is now higher than the Bank had expected.
The global economic expansion is becoming more synchronous, as anticipated in July, with stronger-than-expected indicators of growth, including higher industrial commodity prices. However, significant geopolitical risks and uncertainties around international trade and fiscal policies remain, leading to a weaker US dollar against many major currencies. In this context, the Canadian dollar has appreciated, also reflecting the relative strength of Canada’s economy.”
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.
I’ll be in touch again for the next announcement on October 25, 2017.