At 10:00 am EST, Wednesday March 5th, 2014 the Bank of Canada again did what was expected they would do, which was to continue to maintain their Overnight Rate of 1%. Financial Institutions traditionally add 2% to the Overnight Rate, and use the total as their Prime Rate. What this means to you is the Prime (base) Rate you will continue to pay, in most cases, is 3%.
As you know, Variable/Adjustable Rate Mortgages, Lines of Credit and Student Loans are all based on the Prime Rate. Here is my update on the Bank of Canada announcement this morning regarding the status of the Central Bank’s “Overnight” Rate, which in most cases impacts the Banks, Credit Unions and Trust Company’s Prime Lending Rates.
Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision today:
“The global economy is evolving largely as anticipated, with growth expected to strengthen in 2014 and 2015. The United States is still expected to lead the acceleration in advanced economies, although recent data have been softer, largely owing to weather effects. Volatility in global financial markets has increased somewhat, reflecting buoyant market conditions in most advanced economies and increased risk differentiation among emerging markets. More recently, tensions in Ukraine have added to geopolitical uncertainty. In Canada, economic growth in the fourth quarter of 2013 was slightly stronger than the Bank anticipated. Although exports have been a little stronger than previously thought but continue to underperform, and overall business investment has yet to pick up.”
Further to the above, the Central Bank does not expect to increase their rate in the foreseeable future, with any change most likely to occur late 2014 or early 2015. They intend to wait to see economic growth continue in a further upward direction, and to become more sustainable long term. Increases to the Overnight Rate, since 1992, have only been 0.25% at any ONE time, so we don’t need to worry about seeing a significant increase all at once.
Fixed Mortgage Rates have dropped just slightly since the last announcement, ranging from 3.19% to 3.39% for a Five Year Fixed Term. As a Mortgage Broker, I have access to rate “specials”, so I am presently able to offer 3.09% for a Five Year Term, and 2.79% for a Three Year Term. These rate specials are time sensitive, so if you or a friend or family member are considering mortgage financing in the near future, please call me so we can discuss your options, and place a short term rate hold with one of the many lenders I work with.
Unless you feel otherwise, I’d recommend that those of you with Variable/Adjustable Rate Mortgages remain with your current Variable/Adjustable 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.
Are you making the most of the low payments you still have? No doubt you are getting ready to file your 2013 Income Tax Return. Are you expecting a refund? If so, please make sure you are paying off your high interest debt first… credit cards, etc. Give me a call and we can chat about helping you make the most of that refund, and the savings you continue to make on your mortgage. I have some great budgeting and savings strategies for you – let me know as I would be happy to assist.
Check back April 16th, 2014 for an update on the next Central Bank announcement.