So school is back and the lazy days of summer are behind us…are you maybe feeling a little gloomy… if so, let me cheer you up with some good news…
As you know, your variable/adjustable rate mortgage, line of credit and/or student loans are all based on the Prime Rate. 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 the Prime lending Rate.
At 10:00 am EST, Wednesday September 9th, 2015 the Bank of Canada again did what we expected them to do … they continue to maintain their overnight rate and in fact are not likely to make any change until 2016 or even into 2017! The BOC hasn’t increased their rate since September 2010 – that’s exactly 5 years that you have been benefiting from the low prime rate on your mortgage, line of credit or student loan. But I have a question for you…in the last five years 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 don’t think you are as 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. I’d like to offer you a 20 minute pro bono consultation to see what we can do to help hit those wealth goals and dreams for you and your family. Get a clear financial outlook, avoid expensive debt and it won’t be just the leaves that are falling in a month or two, but the amount of unnecessary interest and debt you have as well… let’s get you closer to that Mortgage Burning Party! It’s never too late to start planning. Maybe this doesn’t apply to you, but you may have a friend or family member that we could help and if that’s the case, feel free to share this information with them.
So to continue with the Bank of Canada news, here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision today:
“Inflation has evolved in line with the outlook in the Bank’s July Monetary Policy Report (MPR). Total CPI inflation remains near the bottom of the target range, reflecting year-over-year price declines for consumer energy products. Core inflation has been close to 2 per cent, with disinflationary pressures from economic slack being offset by transitory effects of the past depreciation of the Canadian dollar and some sector-specific factors. The dynamics of GDP growth in Canada outlined in July’s MPR also remain intact. The stimulative effects of previous monetary policy actions are working their way through the Canadian economy.
Canada’s resource sector continues to adjust to lower prices for oil and other commodities, with some spillover to the rest of the economy. These adjustments are complex and are expected to take considerable time. Economic activity continues to be underpinned by solid household spending and a firm recovery in the United States, with particular strength in the sectors of the U.S. economy that are important for Canadian exports.”
The Bank still feels that they won’t consider increasing rates to as far out as 2016! They continue to wait and see economic growth continue on a more upward direction and become more sustainable long term. 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 rates, they haven’t changed much at all since the last announcement and are hovering, on average, around 2.69% for a five year fixed term.
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/adjustable rate product and continue with your strategy and plan as discussed. 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. The next announcement on any change to the prime rate is October 21, 2015 at which time I’ll be in touch again.
