Bank of Canada holds rate steady……yet again!
On October 23, the Bank of Canada announced that they would not be adjusting their prime lending rate and that the prime lending rate would remain at 3%. This will have a direct impact on any variable rate mortgage(s), secured line(s) of credit, or personal line(s) of credit that you may have.
Growth is expected to be modest at best in Canada and the US economy is softer than expected. All of the political wrangling in the States is slowing economic development, that affects all Canadians.
The Bank of Canada is predicting a favorable future though, saying that the economy will return to full production capacity at the end of 2015. This usually means that interest rates will remain lower until then. Inflation, which is maybe the biggest factor in prime interest rate changes, has remained low in the last few months and is forcasted to stay that way for a while. Which is good for people in variable rate mortgages and lines of credit.
In the rest of the world, China is seeing renewed momentum and Europe has surprised everyone on the upside by showing some modest growth when none was expected. Other emerging economies has showed some slowing as financial conditions have tightened.
For these reasons I am advising clients in variable rate mortgages remain in variable rate mortgages.
Although we have seen some sizable increases in the fixed rates over the last three months, the current rates are still very low compared to historical numbers. We are finally seeing a gap between the variable rate and the fixed rate which is exactly how it should be. There has to be some reward for the risk associated with the variable rate. In this market there is more balance and choice for the borrower.
For the first time in a few years we are seeing a rise in the number of variable rate mortgages that we are doing. We had been very heavy in fixed rates with them being so low the variable wasn’t a viable option.
With rates staying low, we are continuing to recommend that clients stay in their variable rate mortgages. The date of the Bank of Canada’s next announcement is scheduled for December 04, 2013.
Josh Higgelke, Partner/Mortgage Associate Axiom Mortgage Solutions