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, 2015, the Bank of Canada again did what we expected them to do … they continued to maintain their overnight rate. What this means to you is that once again the prime rate on your mortgage, line of credit or student loan will not change and remains at 2.70%. This is great news, but don’t forget to make the most of the low payments you still have, as the rate will increase in the future. If you haven’t done so already, give me a call and we can chat about helping you get set up with a great GIC, Tax Free Savings Account, or Retirement Savings Plan as your payments continue to remain low. The holiday season is upon us which often means our personal spending on gifts and celebrations will potentially blow our budgets as we spend more than we maybe should… let me help you get back on track with a review of your financial situation which might be a savings plan, purchasing an income property or debt consolidation to pay off high interest loans or credit cards. If you would like to chat about some budgeting and saving strategies – let me know, as I would be happy to assist.
Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision:
“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.”
Based on this news and continued slower level of economic activity in Canada, the Bank has chosen to remain on the sidelines. A few economists suggest the BOC to remain there until 2017. 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.
As for Fixed interest rates, they have climbed over the past couple of weeks in anticipation of a Fed increase. The average, fully featured, 3 and 5 year fixed rates are sitting at 2.34% and 2.79% respectively.
Based on this recent announcement, and the anticipation that the prime rate will remain low throughout 2016, 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. Conversely, if you feel you would like to explore an adjustable rate option, give me a shout and we can chat about a couple of different strategies. The next announcement on any change to the prime rate is January 20th, 2016 at which time I’ll be in touch again.
To talk strategy or to just understand how you can benefit from today’s low interest rate environment, please give us a call one of our Mortgage Planners TODAY…we would be happy to assist.