As you know, your variable 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 your Prime Rate.
At 10:00 am EST, Wednesday March 1st, 2017 the Bank of Canada again did what we expected them to do … stay the course. 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 fabulous news, but are you still making the most of the low payments you still have, as the rate will increase in the future. No doubt you are getting ready to file in 2016 Income Tax Return – are you getting a refund? Give me a call and we can chat about helping you make the most of that refund and the savings you continue to make on your mortgage – I have some great budgeting and savings strategies for you – let me know as I would be happy to assist.
Here is an excerpt of the very short announcement from the Bank of Canada and what they had to say about their decision today:
“The Bank’s Governing Council remains attentive to the impact of significant uncertainties weighing on the outlook and continues to monitor risks outlined in the January MPR. In this context, Governing Council judges that the current stance of monetary policy is still appropriate and maintains the target for the overnight rate at 1/2 per cent.”
The unusually short BOC statement and the comment “significant uncertainties” suggests to me that the BOC will not be increasing their rate any time soon. 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 have edge higher due to both the Trump effect and bank regulators (throw the Department of Finance in this mix too) increasing capital requirements. The recent policy changes have, for the first time in history, interest rates for high ratio (less then 20% down) priced lower than the more costly conventional business. For those with less than 20% down, you can expect a 5-year fixed rate around 2.69%. For those with 20% or more down, you can expect the same 5-year product around 2.79% and for those looking to purchase a rental property…well, even higher yet. Before we get to excited, a 10 basis point difference (2.69% – 2.79%) equates to a nominal $15 a month. Oh, and did I mention there are a few exceptions? Call me and we can discuss in great detail.
Based on this recent announcement, and the anticipation that the prime rate will remain low, unless you feel otherwise, I’d recommend that you remain with your current variable rate product. However, if having a fixed payment is important to you, call me so I can calculate what your new payment would look like. The next announcement is set for April 12th, 2017, at which time I’ll be in touch again.
If you are thinking of listing your home for sale and/or buying a new home, renovating, debt consolidation to free up cash flow, give us a call…we’d be happy to discuss the various options.
We hope you appreciate our commentary and if know others who could benefit, please don’t hesitate to pass this information along. If you’re interested in talking strategy (variable vs. fixed, 2 yr vs. 5 yr, etc…), give me a shout at 403.242.5547. We look forward to hearing from you.
