If you have a variable rate mortgage, line of credit and/or student loan, today’s announcement from the Bank of Canada to maintain their overnight rate is good news for you. In most cases, changes to the Overnight Rate impacts your Prime Rate and maintaining this rate should mean no changes to your current repayments.
The current long-term economic outlook is pretty uncertain with many changing variables and an upcoming Federal election. The bank has remained conservative based on this and they are waiting to see how the spring market pans out prior to making any interest rate adjustments, up or down.
Global economic growth has slowed by more than the Bank forecast in January. In Canada, growth during the first half of 2019 is now expected to be slower than anticipated. Last year’s oil price decline and ongoing transportation constraints have curbed investment and exports in the energy sector. Investment and exports outside the energy sector, meanwhile, have been negatively affected by trade policy uncertainty and the global slowdown. Weaker-than-anticipated housing and consumption also contributed to slower growth. The Bank expects growth to pick up, starting in the second quarter of this year. Housing activity is expected to stabilize given continued population gains, the fading effects of past housing policy changes, and improved global financial conditions. Consumption will be underpinned by strong growth in employment income. Outside of the oil and gas sector, investment will be supported by high rates of capacity utilization and exports will expand with strengthening global demand. Meanwhile, the contribution to growth from government spending has been revised down in light of Ontario’s new budget.
Barb Pinsent from Mortgages by Barb explains “Fixed term interest rates have decreased slightly with a range of 3.09% to 3.29% for a five-year fixed term. Don’t forget that if you want to lock in you can take a shorter term that will typically have a lower rate attached to it. If the net interest rate on your current variable is the same as or higher than the current fixed term rates right now, even though the prime rate will still remain low for a while now, it might be time to chat about your options including potentially converting to a fixed term. Converting to a fixed term isn’t right for everyone as other factors are to be taken into consideration such as payment change, income and future plans such as renovating, moving etc.”
With the weather finally starting to warm up, today’s announcement and the anticipation that the prime rate will remain low through the spring market, now might be the time to start to think about your options. Getting expert advice is your first step, so contact Barb on 780-370-1490 to discuss what is suitable for you and your situation. The next announcement from the Bank of Canada will be May 29, 2019.