January 18, 2012
Variable rate mortgages, lines 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 regarding changes to their Overnight Rate which in most cases impacts the Prime lending Rate.
At 9:00 am EST, January 17th, 2012, the Bank of Canada again did what we expected them to do... they maintained their overnight rate. It means that the prime rate on your mortgage or line of credit will NOT change and remains at 3.00%. This is good news that will allow many Canadians to continue to make the most of their low mortgage payments and perhaps pay off unsecured debt or start a savings plan.
Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision:
"The outlook for the global economy has deteriorated and uncertainty has increased... The Bank continues to assume that European authorities will implement sufficient measures to contain the crisis, although this assumption is clearly subject to downside risks. The Bank expects the U.S. recovery will proceed at a more modest pace going forward. For Canada, net exports are expected to contribute little to growth, reflecting moderate foreign demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar. In contrast, very favourable financing conditions are expected to buttress consumer spending and housing activity."
The outlook hasn't really changed since the last announcement... they expect that growth will slowly continue but it is anticipated that prime rate might not actually increase until into 2013. When it does start to increase, it is expected to be gradual and controlled in line with economic recovery, both in Canada and globally. Remember any change to the prime rate since 1992 has only been by 0.25% at any ONE time.
I have seen fixed rates remain very low at around 3.19% to 3.49% for a five year fixed term. Four year terms are as low as 2.99% and a three year mortgage is down to 2.89%.
Based on this recent announcement, and the anticipation that the prime rate will still remain low for the coming months, I am recommending that existing Variable Rate mortgage clients remain with their current variable rate product. The interest rate on these existing contracts is generally very much lower than a fixed term or a new variable rate mortgage right now.
However, if you have a mortgage and having a fixed payment is important to you, it may make sense to refinance an existing fixed rate mortgage today to lock in these great low rates for the next 4 to 5 years.
The next announcement on any change to the prime rate is March 8th, 2012 at which time I'll be in touch again.
In the meantime, with these low rates it is a great time to buy a property or consider refinancing especially as you can hold rates for up to six months!
If you know of someone who is looking for advice on their real estate purchase in West Vancouver, North Shore or in Vancouver downtown, with no obligation, would you mind passing along my contact information on to them? As always, your support is very much appreciated.