Bank of Canada

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 September 4, 2019, the Bank of Canada maintained their overnight rate which in essence means no change to your interest rate.

You might have heard in the news, but we now have a new First Time Home Buyer Incentive Program that helps make owning a home more affordable! This program is specifically designed to reduce your monthly carrying costs. The Incentive enables first-time homebuyers to reduce their monthly mortgage payment, without increasing the amount that they must save for a down payment. Reach out now to find out if you are eligible and how this might help you save money on your monthly carrying costs! 

Also the qualifying rate has dropped as well which could also increase your purchasing power.

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

“As the US-China trade conflict has escalated, world trade has contracted and business investment has weakened. This is weighing more heavily on global economic momentum than the Bank had projected earlier. Meanwhile, growth in the US has moderated but remains solid, supported by consumer and government spending. Commodity prices have drifted down as concerns about global growth prospects have increased. These concerns, combined with policy responses by some central banks, have pushed bond yields to historic lows and inverted yield curves in a number of economies, including Canada.
In Canada, growth in the 2nd quarter was strong and exceeded the Bank’s July expectation, although some of this strength is expected to be temporary. The rebound was driven by stronger energy production and robust export growth, both recovering from very weak performance in the first quarter. Housing activity has regained strength more quickly than expected as resales and housing starts catch up to underlying demand, supported by lower mortgage rates. This could add to already-high household debt levels, although mortgage underwriting rules should help to contain the buildup of vulnerabilities. Wages have picked up further, boosting labour income, yet consumption spending was unexpectedly soft in the quarter.  Business investment contracted sharply after a strong first quarter, amid heightened trade uncertainty. Given this composition of growth, the Bank expects economic activity to slow in the second half of the year.

Inflation is at the 2% target with CPI inflation in July being stronger than expected, largely because of temporary factors including higher prices for air travel, mobile phones, and some food items, which are offsetting the effects of lower gasoline prices.”

Fixed rates have dipped just slightly since the last announcement.

Even though Canada’s economy is operating close to potential right now, escalating trade conflicts and related uncertainty are taking a toll on the global and Canadian economies. In this context, the bank will keep a very close watch on incoming data, with the potential to changing rates in the future – there is even rumblings they may drop rates if needed. Based on the anticipation that the prime rate will still remain low BUT fixed term rates have dropped, I’d recommend that we chat – it might be worth switching to a fixed term if your current variable rate mortgage is higher than a fixed term. 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 October 30, 2019.

I wonder if I can ask a favour, if you hear a friend or family member talk about going through a financially tough time – maybe I can help with some budgeting, credit counselling and debt consolidation options for them.  In any of these cases, would you mind passing my contact information on to them – this is very much appreciated.

I’ll be in touch again for the next announcement on October 30, 2019.

Yours truly,

Eva Neufeld
Mortgage Broker
Mortgage Tailors

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