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PostPosted: Wed May 29, 2013 9:10 am 
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Joined: Fri Feb 01, 2008 2:35 pm
Posts: 528
The Bank of Canada once again (and to no surprise) maintains it's overnight rate following their interest rate announcement at 10:00am this morning (Wednesday, May 29, 2013). 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, recent economic indicators suggest that growth in the first quarter was stronger than the Bank projected in April. For the year as a whole, growth is expected to remain broadly in line with the Bank's MPR forecast. Over the projection horizon, consumer spending is expected to grow at a moderate pace, business investment to grow solidly, and residential investment to decline further from historically high levels. Growth in total household credit is slowing and the Bank continues to expect that the household debt-to-income ratio will stabilize near current levels. Exports are projected to continue to recover, but to be restrained by subdued foreign demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar."

The past few reports have talked about growth and continued growth in our economy which is definitely great news.

This decision doesn't affect fixed mortgage rates, which remain as low as 2.69% for a 5 year fixed. While variable rate mortgages and lines of credit are affected by prime rate, fixed mortgage rates are determined by bond yields which have been rising precipitously since the beginning of may. This places upward pressure on fixed mortgage rates, which have been virtually unchanged since early March, however some lenders have already made moves with some increases, and more may follow if this trend continues. The bond yields were up sharply yesterday pushing them through resistance. We could see increases to fixed mortgage rates as early as 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 July 17th, 2013.

_________________
Paul Meredith
Mortgage Broker
CityCan Financial (est 1976)
416-409-8009
http://www.easy123mortgage.ca
paulm@citycan.com
Lic#10532

Follow me on Twitter! http://www.twitter.com/paulmeredith


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