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 May 30, 2018, the Bank of the Canada againmaintained their overnight rate which means no change to your interest rate. Let’s not forget that interest rates are still low and this is a great time to take advantage. As the spring market has been in full swing right now here are a few things that might’ve been on your mind lately.
News & media. There has been A LOT of buzz in the past few weeks about the housing market taking a major plummet. One of the key factors I have been discussing is how 2017 was an outlier year. Meaning these numbers were so far off trend they are skewing results and thereby allowing the media to develop a news frenzy on how the housing market is plummeting. Remember if you compare this year so far with any other year we are pretty on trend for standard growth and days on market. Keep this in mind when you make any real estate decisions this year.
Renewals.After all the regulation changes at the end of 2017, nobody was really sure of what the effect would be on upcoming renewals. After monitoring the trends this spring, it has become apparent that lenders are taking advantage of your qualifying position and are sometimes using this to their advantage. Moral of the story is I am still here to work with to find the best options, whether that is staying with your current lender or moving. What is essential to this strategy is having a plan! If you have a mortgage renewal coming up this year, reach out to me now and let’s start exploring
what your options are and how we can get you closer to your goals! I have some really amazing options from lenders that can making switching an option for you!
It’s time to chat about your options! It is never too late, or early, to start planning. Chat to me about your options, I’d be happy to make your plans become a reality.
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 activity remains broadly on track with the Bank’s forecast. Recent data points to some upside to the outlook for the US economy. At the same time, ongoing uncertainty about trade policies is dampening global business investment and stresses are developing in some emerging market economies. Global oil prices have been higher than assumed in April, in part reflecting geopolitical developments.
Inflation in Canada has been close to the 2% target and will likely be a bit higher in the near term than forecast in April, largely because of recent increases in gasoline prices. Core measures of inflation remain near 2%, consistent with an economy operating close to potential. As usual, the Bank will look through the transitory impact of fluctuations in gasoline prices.
Activity in the first quarter appears to have been a little stronger than projected. Exports of goods were more robust than forecast, and data on imports of machinery and equipment suggest continued recovery in investment. Housing resale activity has remained soft into the second quarter, as the housing market continues to adjust to new mortgage guidelines and higher borrowing rates. Going forward, solid labour income growth supports the expectation that housing activity will pick up and consumption will continue to contribute importantly to growth in 2018.”
Overall, to keep inflation near target, the bank continues its assessment that they will take a gradual approach to rates increasing guided by incoming data – something that we have all known for a long time! 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 term interest rates have fluctuated up and down a bit over the last four weeks with a range of 3.39% to 3.59% for a five-year fixed term – but three-year terms in the 3.09% to 3.19% range. Don’t forget that if you want to lock in you can take a shorter term that will typically have a lower rate attached to it. 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.
Based on this recent announcement, and the anticipation that the prime rate will remain low through the spring market, 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 July 11, 2018.
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.