Wednesday 23 January 2013

Record streak continues for unchanged prime rate


The great news for variable rate mortgages and lines of credit is that the prime rate remained unchanged once again. This follows the Bank of Canada's rate announcement at 10:00am this morning (Wednesday, January 23, 2013). This was really no big surprised as there aren't any anticipated increases to prime rate until at least this spring or possibly even later. This means the prime rate on your mortgage or line of credit will remain unchanged at 3.00% and your payment will not change. The rate has been unchanged now since September 2010 adding to 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:

"In Canada, the slowdown in the second half of 2012 was more pronounced than the Bank had anticipated, owing to weaker business investment and exports. Caution about high debt levels has begun to restrain household spending. The Bank expects economic growth to pick up through 2013. Business investment and exports are projected to rebound as foreign demand strengthens, uncertainty diminishes and the temporary factors that have weighed on resource sector activity are unwound. Nonetheless, exports should remain below their pre-recession peak until the second half of 2014 owing to a lower track for foreign demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar. Consumption is expected to grow moderately and residential investment to decline further from historically high levels. The Bank expects trend growth in household credit to moderate further, with the debt-to-income ratio stabilizing near current levels.

Relative to the October MPR, Canadian economic activity is expected to be more restrained. Following an estimated 1.9 per cent in 2012, the economy is expected to grow by 2.0 per cent in 2013 and 2.7 per cent in 2014. The Bank now expects the economy to reach full capacity in the second half of 2014, later than anticipated in the October MPR."

While growth has been slower than expected, the keyword here is in fact 'growth', which is good to hear.

This doesn't affect fixed rates, which remain as low as 2.99% - 3.19% for a 5 year fixed through the mainstream market. If you know the right broker to call (wink wink), you may qualify for a 5 year fixed rate as low as 2.84% at the moment.

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 March 6th, 2013. 

Here is the link to the announcement with the full details: http://www.bankofcanada.ca/2013/01/pres ... 013-01-23/