Bank of Canada December Update
As you know, variable rate mortgages, lines of credit and/or student loans are all based on the prime rate and here is an update from me on the recent Bank of Canada announcement on changes to their Overnight Lending Rate which in most cases impacts your Prime rate.At 10:00 am EST, Wednesday December 4th, 2013 the Bank of Canadaagain did what we expected them to do... they continued to maintain their overnight rate.What this means to you is that once again the prime rate on your mortgage, line of creditor student loan willnotchange and remains at 3.00%. This is fabulous news but don't forget to make themostof the low payments you still have, as the ratewill increase in the future. Theholiday season is upon us which often means ourpersonal spendingon gifts and celebrations will potentiallyblow our budgetsas we spend more than we maybe should... let me help you get back on track with a review of your financial situationwhichmight be a savings plan,purchasing anincome property or debtconsolidation topay off high interest loans or credit cards. If you would like to chat about some budgeting and saving strategies - let me know as I would be happy to assist.Here is an excerpt from the announcement from the Bank of Canada and what they had to say about their decision:"The global economy is expanding at a modest rate, as the Bank expected.Although growth in several emerging markets has continued to ease, growth in the US during the 3rd quarter of 2013 was stronger than forcasted.Even if some of this pickup was due to temporary factors, the data is consistent with the Bank's view of gathering momentum in the US economy. In Canada,the housing sector has been stronger than expected but is consistent with updated demographic data and a pulling forward of home purchases in light of favourable financing conditions. The Bank continues to expect a soft landing in the housing market. Non-commodity exports continue to disappoint and the price of oil produced in Canada has eased further.Business investment spending is up from previous low levels, but is still recovering more slowly than anticipated. On balance, the Bank sees no reason to adjust its expectation of a gradual return to full production capacity around the end of 2015"Based on this news and continued slower level of economic activity in Canada, the Bank does not expect to increase their rate in the foreseeable future with any change most likely to occur in late 2014 or even not until 2015! Remember that any increase to the prime rate since 1992 has only been by 0.25% at anyONE time, so you won't see a large significant increase all at once.Fixed rates did go up but then have come back down since. Right now they are sitting at around 3.39% to 3.59% 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. The next announcement on any change to the prime rate is January 22, 2014.