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Monthly Archives: July 2018

Good morning

 

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. 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 lender’s prime rate.

Recent economic data has been strong and there were a number of jobs added last month hence the Bank increasing their rate again so quickly! They are definitely keeping on track with their mandate to get interest rates back to normal levels. You have to admit that we have had it good for a long time and we can still continue to benefit from low rates so don’t panic!

Last year we saw two rate increases, each of 0.25%, and this is our second rate increase this year as the Bank attempts to get interest rates back to their traditional average. You might be concerned about your cash flow and budgeting at this point and might be considering moving over to a fixed term mortgage. Fixed term interest rates have decreased slightly with a range of 3.09% to 3.39% for a five-year fixed term. 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. 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 carddebt 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, the new year is a great time to work on setting goals and developing a strategy!

To continue with the Bank of Canada news, here is an excerpt of the announcement and what they had to say about the current market conditions:

 “The US economy is proving stronger than expected, reinforcing market expectations of higher policy rates and pushing up the US dollar. This is contributing to financial stresses in some emerging market economies. Meanwhile, oil prices have risen. Yet, the Canadian dollar is lower, reflecting broad-based US dollar strength and concerns about trade actions. The possibility of more trade protectionism is the most important threat to global prospects.

Canada’s economy continues to operate close to its capacity and the composition of growth is shifting. Temporary factors are causing volatility in quarterly growth rates.  Household spending is being dampened by higher interest rates and tighter mortgage lending guidelines. Recent data suggest housing markets are beginning to stabilize following a weak start to 2018. Meanwhile, exports are being buoyed by strong global demand and higher commodity prices. Business investment is growing in response to solid demand growth and capacity pressures, although trade tensions are weighing on investment in some sectors. Overall, the Bank still expects average growth of close to 2% over 2018-2020.

CPI and the Bank’s core measures of inflation remain near 2%, consistent with an economy operating close to capacity. The Bank estimates that underlying wage growth is running at about 2.3%, slower than would be expected in a labour market with no slack.

As in April, the projection incorporates an estimate of the impact of trade uncertainty on Canadian investment and exports. This effect is now judged to be larger, given mounting trade tensions.  The July projection also incorporates the estimated impact of tariffs on steel and aluminum recently imposed by the United States, as well as the countermeasures enacted by Canada. Although there will be difficult adjustments for some industries and their workers, the effect of these measures on Canadian growth and inflation is expected to be modest.

Despite some volatility, it looks like they expect that higher interest rates are warranted to keep inflation near target; they will continue to take a gradual approach to future increases based on the economy’s adjustment to these higher rates, the evolution of capacity, wage pressures and trade actions to and from the US. Based on this it should be a while before they have another increase, but we will keep a close watch.

I wonder if I can ask a favour; if you hear a friend or family member talk about going through 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 September 5th, 2018.

 

Yours truly,

Eva Neufeld AMP – Accredited Mortgage Professional
Verico Mortgage Tailors
(780) 244-0505