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
At 10:00 am EST, Wednesday May 24, 2017, the Bank of the Canada again maintained their
overnight rate which means no change to your interest rate. Let’s not forget that this is a great
time to take advantage of such historical low rates. As the weather gets even warmer you
might be thinking of:
- Accessing the equity in your home for some debt consolidation or renovations
especially if you have noticed a significant increase in house values in your area
based on this crazy Spring market!
- Worried about your kids not being able to afford or qualify to get into the housing
market EVER! Have you thought about purchasing a home of their choice as an
investment property. I can work with them to get them on the right qualifying and
savings plan and you could even consider working with them to purchase it from you in
the future – this is commonly known as Rent to Own and something I can help you with
– reach out and let’s chat!
To continue with the Bank of Canada news, here is an excerpt of the announcement and what
they had to say about their decision:
“Inflation is broadly in line with the Bank’s projection… Food prices continue to decline, mainly
because of intense retail competition, pushing inflation temporarily lower. The global economy
continues to gain traction and recent developments reinforce the Bank’s view that growth will
gradually strengthen and broaden over the projection horizon.
The Canadian economy’s adjustment to lower oil prices is largely complete and recent
economic data have been encouraging, including indicators of business investment. Consumer
spending and the housing sector continue to be robust on the back of an improving labour
market, and these are becoming more broadly based across regions. Macroprudential and other
policy measures, while contributing to more sustainable debt profiles, have yet to have a
substantial cooling effect on housing markets. Meanwhile, export growth remains subdued in
the face of ongoing competitiveness challenges.”
The Bank’s monitoring of the economic data suggests that very strong growth in the first quarter
will be followed by some moderation in the second quarter. So, it looks like it is still anticipated
that prime rates won’t start increasing until well into 2017 but we are being given the heads up
that they will start increasing eventually. 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
Interest rates haven’t really changed since the last announcement with;
a) Fixed rates ranging from 2.49% to 2.79%
b) The discount on the variable rate has improved with as low as prime minus 0.80% to
0.50% so 1.90% to 2.25%. If your interest rate is higher than this on your variable it
might be worth us revisiting to see if we can make some changes and save you
unnecessary interest. Don’t forget the lower rates quoted here might have specific
conditions for qualifying.
Also, remember that the prime rates and fixed term rates are impacted by two different sets of
economic drivers and so increases in fixed rates doesn’t always mean the same increase in
prime rates and vice versa.
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 rate product as the interest is still lower than a fixed term rate right now. 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. I’ll be in touch again for the next announcement
on July 12, 2017.
I wonder if I can ask a favour; It is that time of year that many may be not going on a summer
vacation or putting their kids into summer camps because they can’t afford it and finances are
tight. If they are a home owner and have some equity, we could potentially help accessing it to
help them get financially stable again or at least a little bit further ahead. If you know anyone
that sounds just like this, would you mind passing my contact information on to them. This is
very much appreciated.