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 May 29, 2019, the Bank of the Canada again maintained their overnight rate which means no change to your interest rate. Let’s not forget that interest rates are still low and this is a great time to take advantage. As the spring market has been in full swing right now here are a few things that might’ve been on your mind lately.
Market Uncertainty. There has been a lot of uncertainty over the past few months regarding what might happen with the housing market. My advice for you is to always remember that when you are looking at your principal residence, it is your home. The amount that appreciates will never be realized until you come to the point where you decide to sell. Also keep in mind that the historical average for most major markets is a 3% increase per year, the major inflation in the market we have seen in the last few years is not the norm.
Interest Rates. Interest rates are once again at historical lows. They have dropped significantly over the course of the spring. This means if you or someone in your circle is looking to jump in, now might be the right time. Why not take advantage of saving thousands in unnecessary interest?
It’s time to chat about your options! It is never too late, or early, to start planning. Chat to me about your options, I’d be happy to make your plans become a reality.
To continue with the Bank of Canada news, here is an excerpt of the announcement and what they had to say about their decision:
“Recent Canadian economic data are in line with the projections in the Bank’s April Monetary Policy Report, with accumulating evidence that the slowdown in late 2018 and early 2019 is being followed by a pickup starting in the second quarter. The oil sector is beginning to recover as production increases and prices remain above recent lows. Meanwhile, housing market indicators point to a more stable national market, albeit with continued weakness in some regions.
Continued strong job growth suggests that businesses see the weakness in the past two quarters as temporary. Recent data support a pickup in both consumer spending and exports in the second quarter, and it appears that overall growth in business investment has firmed. That said, inventories rose sharply in the first quarter, which may dampen production growth in coming months.
The global economy is also evolving largely as expected since April, although the recent escalation of trade conflicts is heightening uncertainty about economic prospects. In addition, trade restrictions introduced by China are having direct effects on Canadian exports. In contrast, the removal of steel and aluminum tariffs and increasing prospects for the ratification of CUSMA will have positive implications for Canadian exports and investment.”
Overall, recent data has reinforced the view that the slowdown in late 2018 and early 2019 was temporary, although global trade risks have increased. In this context, the bank continues its assessment that they will take a gradual approach to rates increasing guided by incoming data – something that we have all known for a long time! 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 term interest rates have dropped quite a bit over the last few weeks with a range of 3.09% to 3.29% for a five-year fixed term. 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 July 10, 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 all the hot markets out there now, and changes to mortgage legislation, there is a lot of confusion especially amongst our first-time home buyers and my specialty is walking them thru the steps with ease! This is very much appreciated.
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