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, April 24, 2019, the Bank of Canada again maintained their overnight rate which means no change to your interest rate. As the weather seems to FINALLY be cooperating you might start thinking about the following.
To continue with the Bank of Canada news, here is an excerpt of the announcement and what they had to say about their decision:
“Global economic growth has slowed by more than the Bank forecast in January. Ongoing uncertainty related to trade conflicts has undermined business sentiment and activity, contributing to a synchronous slowdown across many countries. In response, many central banks have signalled a slower pace of monetary policy normalization. Financial conditions and market sentiment have improved as a result, pushing up prices for oil and other commodities.
In Canada, growth during the first half of 2019 is now expected to be slower than anticipated. Last year’s oil price decline and ongoing transportation constraints have curbed investment and exports in the energy sector. Investment and exports outside the energy sector, meanwhile, have been negatively affected by trade policy uncertainty and the global slowdown. Weaker-than-anticipated housing and consumption also contributed to slower growth.
The Bank expects growth to pick up, starting in the second quarter of this year. Housing activity is expected to stabilize given continued population gains, the fading effects of past housing policy changes, and improved global financial conditions.
Consumption will be underpinned by strong growth in employment income. Outside of the oil and gas sector, investments will be supported by high rates of capacity utilization and exports will expand with strengthening global demand. Meanwhile, the contribution to growth from government spending has been revised down in light of Ontario’s new budget.”
The current long-term economic outlook is pretty uncertain with many changing variables and an upcoming Federal election. The bank has remained conservative based on this and they are waiting to see how the spring market pans out prior to making any interest rate adjustments, up or down.
Fixed term interest rates have decreased slightly with a range of 3.09% to 3.29% for a five-year fixed term. Don’t forget that if you want to lock in you can take a shorter term that will typically have a lower rate attached to it. If the net interest rate on your current variable is the same as or higher than the current fixed term rates right now, even though the prime rate will still remain low for a while now, it might be time to chat about your options including potentially converting to a fixed term. Converting to a fixed term isn’t right for everyone as other factors are to be taken into consideration such as payment change, income and future plans such as renovating, moving etc.
Based on this recent announcement, and the anticipation that the prime rate will remain low through the spring market, 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 May 29, 2019.
I wonder if I can ask a favour; It is that time of year that many think about what they want to accomplish this year – if buying their first home is on the “wish list”, would you mind passing my contact information on to them. With the mixed news on what markets are hot or not, and changes to mortgage legislation, there is a lot of confusion especially amongst our first-time home buyers and my specialty is walking them through the steps with ease! This is very much appreciated.