Bank of Canada Update – December 7, 2016

Good morning So with the snow falling and the beautiful colours and lights of the holiday season approach, we have some great news..

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 December 7, 2016, the Bank of Canada again maintained their overnight rate which in essence means no change to your interest rate. I feel like I have been repeating myself over and over again as they haven’t increased the rate since July 2007 – nine years ago! You continue to benefit from low rates which for sure puts a smile on your face during this holiday season – which if we are honest can be a little stressful at times!

I wanted to reiterate again that there have been a lot of changes in the mortgage legislation and qualifying guidelines recently, and potentially more to come, all in the hope of stabilizing the real estate market as well as ensuring home owners and those with significant debt can handle future interest rate increases. Some of those changes involved refinancing your home in the future to pull equity might result in limited options and tighter qualifying. With all of this comes a lot of confusion and most importantly, how will all these changes potentially impact you and your plans for borrowing funds in the future – whether it is refinancing to maximize the low interest rates and equity in your home, purchasing rental properties or moving up into a bigger home? Call me now for a pro bono consultation to review your current financial situation and let’s start planning now for 2017 – let’s make sure we get you prepared now and ensure the changes won’t impede your future borrowing plans.

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:

“Economic data suggest that global economic conditions have strengthened, as the Bank anticipated in its October Monetary Policy Report (MPR). However, uncertainty, which has been undermining business confidence and dampening investment in Canada’s major trading partners, remains undiminished. Following the election in the United States, there has been a rapid back-up in global bond yields, partly reflecting market anticipation of fiscal expansion in a US economy that is near full capacity. Canadian yields have risen significantly in this context.

In Canada, the dynamics of growth are largely as the Bank anticipated. Following a very weak first half of 2016, growth in the third quarter rebounded strongly, but more moderate growth is anticipated in the fourth quarter. Consumption growth was robust in the third quarter, supported by the new Canada Child Benefit, while the effects of federal infrastructure spending are not yet evident in the GDP data. Meanwhile, business investment and non-energy goods exports continue to disappoint. There have been ongoing gains in employment, but a significant amount of economic slack remains in Canada, in contrast to the United States. While household imbalances continue to rise, these will be mitigated over time by announced changes to housing finance rules.”

Given the downward revision to economic growth, the Bank considers the risks around its updated inflation outlook to be roughly balanced, albeit in a context of heightened uncertainty. It is still anticipated that rates won’t start increasing until well into 2017 depending on how the recent changes will impact the economy. 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 have increased slightly since the last announcement, and are around 2.59% to 2.89% 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 January 18, 2017.

I wonder if I can ask a favour; this time of year can be really tough for many that are not as financially fortunate as us; whether it is mountains of debt that they can’t get a handle on, low income or even unemployed… I can help. If you hear a colleague, friend or family member talk about going thru a financially tough time would you mind letting them know I might be able to help. I can assist home owners, no matter their credit or income, access their equity to get them back on their financial feet and relieve some stress – especially during this time when it should be smiles and joy instead of stress and sleepless nights. My expertise in helping everyone thru budgeting, credit counselling and debt consolidation can make a huge difference to their outlook. Would you mind passing my contact information on to them – I’ll provide a pro bono consultation to provide some great options on how I can help – this is very much appreciated.

Yours truly,

Mark Kupina        

MortgageTeam  905.730.4782 – mark@kmortgage.ca