If there is one thing that is critical to buying a house is securing a mortgage – and even more important a mortgage with a manageable interest rate.
This post below is an article that I picked up from Lisa Upshaw’s newsletter. Lisa was responding to and commenting on the recent Bank of Canada announced on prime interest rates.
With Lisa’s permission, we are printing her article, with some minor revisions. – Karen
Lisa Upshaw is an Independent Mortgage Agent in Burlington. She has 17 years working in the banking industry having specialized in mortgages for the past 11. Lisa says her job is to “provide valuable information and answer consumer questions from budgeting and cash flow management to mortgages and lines of credit.”
Bank of Canada Maintained Their Rate
Variable rate mortgages, line of credits and/or student loans are all based on the Prime Rate. Here is an update 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 July 13, 2016, the Bank of Canada maintained their overnight rate which in essence means no change to the interest rate on your variable rate mortgage, line of credit and/or student loans.
The announcement continues:
“After a weak start to 2016 the US economy is showing signs of a rebound, with a healthy labour market and solid consumption growth. In the wake of Brexit, global markets have materially re-priced a number of asset classes. Financial conditions, already accommodative, have become even more so.
In Canada, the quarterly pattern of growth has been uneven… pulled down by volatile trade flows, uneven consumer spending, and the Alberta wildfires. A pick-up to 3.5% is expected in the third quarter as oil production resumes and rebuilding begins in Fort McMurray.
Overall, the risks to the profile for inflation are roughly balanced, although the implications of the Brexit vote are highly uncertain and difficult to forecast. At the same time, financial vulnerabilities are elevated and rising, particularly in the greater Vancouver and Toronto areas.”
While, the Bank of Canada is still concerned with the financial vulnerabilities and regional divergences underway in Canada’s economy, it is anticipated that rates won’t start increasing until well into 2016 even early 2017.
Variable and Prime Rates for Lending
Based on this announcement, and the anticipation that the prime rate will still remain low for a while now, unless you feel otherwise, I’d recommend remaining with your current variable rate products as the interest is lower than a fixed term right now.
While fixed rates haven’t really changed at all since the last announcement, and are around 2.49% to 2.59% for a five year fixed term, some consumers continue to prefer a fixed payment mortgage for their budgeting purposes.
My role as your mortgage agent is to provide you with the calculations so you can make an informed decision.
Keep in mind, that any increase to the prime rate since 1992 has only been by 0.25% at any ONE time, so we shouldn’t see a large significant increase all at once.
So what’s that got to do with summer?
While enjoying time off with family and of course the warm outdoors, our minds start racing about other possibilities such as contributing to your RSP or TFSA; purchasing a home, cottage or perhaps taking on a renovation project like a new basement or kitchen, or maybe you’ve decided that this is the year for the new pool.
If that’s the case, this is the time to get serious especially as rates are still at historical lows!
My job as a mortgage agent is to find you the best alternative that fits your lifestyle, whether you are looking to renovate or purchase your new home.
I can also help you manage your money. Mortgage agents offer a number of different services including budget support, credit counselling and debt consolidation.
Stay on top of what’s happening with the Bank of Canada – the next announcement is September 7th – by signing up for Lisa’s newsletter.
Our team of real estate sales professionals is committed to finding you, your dream home. Whether you’re looking to buy or sell, the Karen Paul team is here to help with any questions.