Wednesday 9 March 2016

This mornings interest rate announcement.... a disappointment?

There have been predictions that the prime rate will drop again before spring, however it looks like we'll have to wait a little longer to see if another cut actually comes to fruition. The Bank of Canada announced this morning that they will be maintaining their overnight rate, which is the rate prime is based on. The announcement came at 10am this morning. (March 9, 2016). There has been much speculation that there would be a cut this time around with many economists predicting a 50/50 chance. I interpret that as them telling us that our guess is as good as theirs!

There is still a chance that we will see a decrease to prime before the spring time, although I would say chances of this are dwindling. One of the reasons for their decision this morning is due to their expectations that global growth will continue throughout the year and into the next. 

For now, the prime rate remains 2.70%. 

While the discounts off prime have been shrinking since late summer, you can still get a variable rate as low as prime -0.60%.

Prime rate and fixed mortgage rates are unrelated. While variable rate mortgages and lines of credit are affected by prime rate, fixed mortgage rates are determined by bond yields which have declined steeply since the beginning of the year.

5 year fixed mortgages have now fallen as low as 2.39%

You can read about the announcement here:  http://www.bankofcanada.ca/2016/03/f...se-2016-03-09/

The next interest rate announcement will be on April 13th, 2016

Wednesday 20 January 2016

The first of the year and most anticipated interest rate announcements in recent years came this morning at 10:00am  (January 20, 2016).  The decision is that the Bank of Canada will be maintaining it's overnight rate, which means there will be no changes to prime rate.  There was much speculation that there would be a cut this time around with many economists predicting a 50/50 chance.  Really just another way of them saying that your guess is as good as theirs. 

There is still a good chance that we will see a decrease again to prime before the spring time.  Even if they were to cut the rate, it will be interesting to see how banks react. There is some speculation that banks will simply ignore another rate cut.  We'll see. There were two cuts to prime rate early in 2015 and banks have yet to match the full cut.

For now, the prime rate remains 2.70%. 

There has not been an increase to prime rate since September 2010 which is the longest streak in history.


This discounts on variable rate mortgages have been shrinking since August, likely do to anticipation of another rate cut.  You can still get a variable rate as low as prime -0.60% with most banks being at around prime -0.10%.  A huge gap.

Prime rate and fixed mortgage rates are unrelated. While variable rate mortgages and lines of credit are affected by prime rate, fixed mortgage rates are determined by bond yields which have declined steeply since the beginning of the year.

5 year fixed mortgages are available as low as 2.49%

With mortgage rates at such ridiculously low levels, now 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.
 
You can read about the announcement here:  http://www.bankofcanada.ca/2016/01/fad-press-release-2016-01-20/
The next interest rate announcement will be on March 9th, 2016