Bank of Canada Maintained Their Rate

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 13, 2016, the Bank of Canada maintained their overnight rate which in essence means no change to the interest rate on your variable rate mortgage, line of credit and/or student loans.   This is still good news for the amount of interest that you will pay, but we also have to recognize that it is a reflection of the slow economy.

So summer is here and there is nothing better than enjoying some time off with family and of course the warm outdoors.  But is your mind racing about other possibilities; maybe converting your RSP, TFSA or LIRA into mortgages for a higher return, buying a cottage or vacation home, renovations such as a new kitchen, finish the basement or add a pool or maybe you just have a bunch of debt that you’d like to eliminate.  Now is the time to get serious about looking into these options… especially as rates are still at historical lows!   Chat to me about your options … I’d be happy to make those plans into reality and save unnecessary interest or even be the banker for a change!

To continue with the Bank of Canada news, here is an excerpt of the announcement and what they had to say about their decision today:

“After a weak start to 2016 the US economy is showing signs of a rebound, with a healthy labour market and solid consumption growth. In the wake of Brexit, global markets have materially re-priced a number of asset classes. Financial conditions, already accommodative, have become even more so.  In Canada, the quarterly pattern of growth has been uneven…  pulled down by volatile trade flows, uneven consumer spending, and the Alberta wildfires. A pick-up to 3.5% is expected in the third quarter as oil production resumes and rebuilding begins in Fort McMurray.

Overall, the risks to the profile for inflation are roughly balanced, although the implications of the Brexit vote are highly uncertain and difficult to forecast. At the same time, financial vulnerabilities are elevated and rising, particularly in the greater Vancouver and Toronto areas.”

The Bank of Canada is still concerned with the financial vulnerabilities and regional divergences underway in Canada’s economy.  It is still anticipated that rates won’t start increasing until well into 2016 even early 2017.  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 really changed at all since the last announcement, and are around 2.59% to 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 variable rate product as the interest is 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 September 7, 2016.

I wonder if I can ask a favour, 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.   Also do you have a friend or family member where buying their first home is on the “wish list”, would you mind passing my contact information on to them – this is very much appreciated.

Mark Kupina

MortgageTeam  905.730.4782 – mark@kmortgage.ca