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PostPosted: Wed Oct 23, 2013 9:17 am 
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Joined: Fri Feb 01, 2008 2:35 pm
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No surprise at all that the The Bank of Canada once again maintains it's overnight rate following their interest rate announcement at 10:00am this morning (Wednesday, October 23rd, 2013). The rate has been unchanged now since September 2010 adding to the longest unchanged streak since the 1950's. This means the prime rate remains unchanged at 3.00%. Economists are now predicting that the prime rate will remain unchanged until sometime in 2016. This is great news for anyone with variable rate mortgages or those who are trying to decide between fixed and variable at this moment.

Here is an excerpt from the announcement made by the Bank of Canada and what they had to say about their decision:

"In Canada, uncertain global and domestic economic conditions are delaying the pick-up in exports and business investment, leaving the level of economic activity lower than the Bank had been expecting. While household spending remains solid, slower growth of household credit and higher mortgage interest rates point to a gradual unwinding of household imbalances. The Bank expects that a better balance between domestic and foreign demand will be achieved over time and that growth will become more self-sustaining. Real GDP growth is projected to increase from 1.6 per cent in 2013 to 2.3 per cent in 2014 and 2.6 per cent in 2015. The Bank expects that the economy will return gradually to full production capacity, around the end of 2015."

While it does talk about economic activity in Canada being lower than expect, it does talk about it picking up steam over the next few years as well as good news about recovery of the global economy. Always nice to see that light at the end of the tunnel!

This decision doesn't affect fixed mortgage rates, which have had significant increases over the past few months. While variable rate mortgages and lines of credit are affected by prime rate, fixed mortgage rates are determined by bond yields which had risen quite steeply starting the beginning of May, but have started to settle back down over the past month.

You can still however you can still get a 5 year fixed mortgage for as low as 3.34% while market rates are between 3.59% - 3.69%. Another option to look at is a 3 year at 2.59% which will save you thousands of dollars over that period. While these rates may even sound high due to where they were over the past year, they are still extremely low by historical standards.

We are now starting to see deeper discounts to variable rate causing it to become popular once again. You can now get a variable rate for as low as prime -0.55%. 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.

You can read about the Bank of Canada's decision here: http://www.bankofcanada.ca/2013/10/publ ... 013-10-23/

The next interest rate announcement will be on December 4th, 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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