Just how long can the prime rate remain unchanged?

Not that this should come as any surprise to anyone, at 9:00am this morning (Tuesday, December 4th, 2012), the Bank of Canada did what we expected once again.....they maintained their overnight rate (which is what prime rate is based on).  This means the prime rate on your mortgage or line of credit will remain unchanged at 3.00%.  Anyone with a variable rate mortgage or line of credit will continue enjoying their low rate and low payment.   The rate has been unchanged now since September 2010 which makes it the longest unchanged streak since the 1950's.

Here is an excerpt from the announcement made by the Bank of Canada and what they had to say about their decision:

[i]"In Canada, economic activity in the third quarter was weak, owing in part to transitory disruptions in the energy sector. Although underlying momentum appears slightly softer than previously anticipated, [u]the pace of economic growth is expected to pick up through 2013[/u]. The expansion is expected to be driven mainly by growth in consumption and business investment, reflecting very stimulative domestic financial conditions. Housing activity is beginning to decline from historically high levels. While the household debt burden continues to rise, growth in household credit has slowed. It is too early, however, to determine whether the moderation in housing activity and credit growth will be sustained.  Canadian exports are [u]expected to pick up gradually[/u] but continue to be restrained by weak foreign demand and ongoing competitiveness challenges.  These challenges include the persistent strength of the Canadian dollar, which is being influenced by safe haven flows and spillovers from global monetary policy."[/i]

Some of the key points in there are the mention of 'growth' and 'expected to pick up', which is always good to hear in these reports.  Some economists are predicting that rates will remain unchanged until mid-2013, but I wouldn't be surprised at all if they were held until further into the year at least.

This doesn't affect fixed rates, which remain as low as 3.09% - 3.19% for a 5 year fixed, although I have 5 year fixed rates as low as 2.89% at the moment, which are actually expected to drop even further by the end of this week.

Given this information, I would recommend anyone currently enjoying a deeper discount (prime -0.50 or more) to stay where they are, unless they are feeling uncomfortable with all the economic volatility.  Anyone with less of a discount may want to consider switching to take advantage of today's historical low rates, which may be very similar to what you are paying right now, however it will give you protection against future rate increases. It may also be a great time to consolidate any higher interest debt into your mortgage to take advantage of such low rates and lowering your overall monthly payment and amount of interest you are paying significantly.

The next interest rate announcement will be on January 23rd, 2013.