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 on changes to their Overnight Rate which in most cases impacts your Prime Rate.
At 10:00 am EST, Wednesday July 15th, 2015 the Bank of Canada again did what we expected them to do … they continue to maintain their overnight rate and in fact, we are not likely to see an up swing until some time in the distant future! What this means to you is that once again the prime rate on your mortgage, line of credit or student loan will likely be cut by some small percentage, but it’s too early to know at this point. It would be nice if the Canadian Banks gave consumers the full benefit of the 25 basis point (bps) cut, but I’m thinking it may only be 10 bps. With Prime rate currently sitting at 2.85%, a 10 bps point cut would translate to a Prime rate of 2.75%. This is fabulous news, but are you still making the most of the low payments you have! If you have any high interest credit card debt that you can’t pay off in full each month, it might be a good time for us to chat about a possible debt consolidation into your mortgage to save you some unnecessary interest… get a clear financial outlook void of expensive debt and start your summer off right and debt free!
“Global growth faltered in early 2015, principally in the United States and China. Recent indicators suggest a rebound in the U.S. economy in the second half of this year, and growth is expected to be solid through the projection. In contrast, China is slowing amid an ongoing process of rebalancing to a more sustainable growth path. This has pulled down prices of certain commodities that are important to Canada’s exports. Financial conditions in major economies remain very accommodative and continue to provide much-needed support to economic activity. Global growth is expected to strengthen over the second half of 2015, averaging about 3 per cent for the year, and accelerate to around 3 1/2 per cent in 2016 and 2017.
The Bank’s estimate of growth in Canada in 2015 has been marked down considerably from its April projection. The downward revision reflects further downgrades of business investment plans in the energy sector, as well as weaker-than-expected exports of non-energy commodities and non-commodities. Real GDP is now projected to have contracted modestly in the first half of the year, resulting in higher excess capacity and additional downward pressure on inflation.”
The Bank has now extended out when they may consider a change and increase rates to as far out as the first half of 2017! 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.
Fixed rates haven’t changed much at all since the last announcement and are sitting 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 adjustable rate product, providing the plan and strategy are still working for you. 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 September 9, 2015 at which time I’ll be in touch again.
I wonder if I can ask a favour – this is a great time for first time home buyers who are thinking of purchasing to start with a pre-approval plan now to get them on track and save unnecessary interest. It is advisable to start planning ahead and would be happy to provide an idea of closing costs and monthly budget payments to start those that you know on the path to home ownership. Also, 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.
Regards,
Jeremy