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 October 23, 2013, 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 3.00%. This is fabulous news but don’t forget, to make the most of the low payments you still have as the rate willincrease 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. Maybe you are thinking of saving for a special occasion or expect a large expenditure in the near future (car, college/university, cottage or investment property purchase), and 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:
“The global economy is expected to expand modestly in 2013, although its near-term dynamic has changed and the composition of growth is now slightly less favourable for Canada. The U.S. economy is softer than expected but as fiscal headwinds dissipate and household deleveraging ends, growth should accelerate through 2014 and 2015. Overall, the global economy is projected to grow by 2.8 per cent in 2013 and accelerate to 3.4 per cent in 2014 and 3.6 per cent in 2015. In Canada, uncertain global and domestic economic conditions are delaying the pick-up in exports and business investment, leaving the level of economic activity lower than the Bank had been expecting. The Bank expects that the economy will return gradually to full production capacity, around the end of 2015”.
Based on this news and slower level of economic activity in Canada, the Bank does not expect to increase their rate in the foreseeable future with any change most likely to occur well into 2015 or even 2016 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 did go up but have since fallen slightly to around 3.59% to 3.79% for a five year fixed term.
Based on this recent BOC 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 rate strategy—providing you are in a Prime minus .40% or better. However, if having a fixed payment is important to you, call me so we can discuss a fixed rate strategy that will meet your needs. The next announcement on any change to the prime rate is December 4th, 2013 at which time I’ll be in touch again.
If you appreciate our commentary and know others who could benefit, please don’t hesitate to pass this information along. If you’re interest in talking strategy, give us a call as we look forward to hearing from you.
Regards,
Jeremy
