As many of you may be aware the Bank of Canada met on Wednesday October 24th, 2018 and decided to raise the overnight lending rate by 0.25%, resulting in a rate of 1.75% – with banks expected to follow suit in raising the prime rate to 3.95% for all major institutions and non bank lenders, asides from TD whose prime rate will now be 4.10%.
What does this mean for you? Do you have a secured or unsecured line of credit? Credit Cards or Variable Rate Loans, or a variable rate mortgage? If so, your rates may change – and your monthly payments will adjust. In terms of a mortgage for every $100,000.00 the result is a difference in payment of $13.00 per month per 0.25% rise in the prime rate. If you have a variable mortgage or line of credit now is the time for us to set up a time to connect to discuss the effects of the increase on your monthly budget and what the best options may be for you.
The Bank of Canada’s economists believes that the economy will grow by approximately 2% per annum from 2018-2020, which is greater than their previously determined 1.9% growth by 0.10%. What does this mean for Canada? It is great news economic growth, rising rates and rising GDP (Gross Domestic Product) are all the result of a healthy and strong economy which will help us in the long term but may result in some necessary personal and financial changes to prepare for the upward pressures of rates, cost of living and products.
The US – Mexico – Canada trade policy has resulted in a reduction in the unease of trade policy which has allowed for a curb in business and investment uncertainty. Meanwhile, the US-China trade dispute continues and creates international uncertainty and will continue to be monitored over the coming months.
Household spending is expected to continue to rise at a stable pace with solid employment growth across a number of sectors, where we have seen moderate credit growth and a stabilizing real estate sector. The CPI (Consumer Price Index) has decreased to 2.1%, with economic forecasting for it to remain around 2% into 2020 when they expect to see a decline to 1.9%. This is a core measure utilized by the bank to monitor inflation (which they hope to maintain around 2%).
Now is the perfect time for us to set up a call or meeting to discuss your financial goals and needs, and to see what solution is best for you. With a variable rate mortgage or HELOC (Home Equity Line of Credit), you can look at solutions of potentially “locking in” or consolidating unsecured debt to maintain a manageable payment plan that suits your personal financial goals.
Variable Rates continue to remain more competitive then Fixed Rates at this time – but remember you always have the ability to lock in at any time to a term equal to or greater than your existing mortgage term. Remember the benefits of your variable rate mortgage:
- Lower Penalty 3 Months Interest vs. Interest Rate Differential Penalty
- Lower Payments then a fixed currently *Subject to your specific rates and terms*
- Rate fluctuates with our economic standing as a nation both locally and globally
- Opportunity to lock into a term greater than or equal to your existing term to allow you the best structure and product for your needs
The next announcement is on December 5th, 2018 and I will continue to keep you in the loop ensuring that you are provided with the most accurate rates, terms, and financial information for your real estate financing needs.
There are also many benefits to a fixed rate mortgage such as consistency, the piece of mind knowing exactly what your payments are, and being able to secure a rate for a period of 1 – 10 years with a rate guarantee.
Know that I am here to answer any questions you may have. If you have a variable rate mortgage, I will be in touch over the course of this week with the specific changes to your mortgage payments and lender options specific to your needs.
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