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I want to wish you a very Happy New Year to you and your family. If one of your New Year’s Resolutions was to get back on track with your financial goals, now is a perfect time. This is the first of many announcements this year about potential interest rate changes that could impact your current and future borrowing plans. My New Year’s Resolution is to help ensure that the impact of any interest rate changes to you is minimal. I am here to provide you with strategies to ensure more of your hard-earned cash stays in YOUR pockets and doesn’t line someone else’s!
As you know, your variable rate mortgage, line of credit and/or student loans are all based on the Prime Rate and here is your personal update from me on the recent Bank of Canada announcement. The Bank of Canada has maintained their Overnight Rate.
The outlook isn’t looking as rosy for the Canadian economy as we previously expected, so even though we have now moved into a steady rising interest rate climate, it is highly likely that rates will increase at slower pace than we have seen in the last 18 months. Even though we did not see a rate increase this time, that doesn’t mean there won’t be some in 2019! You have to admit that we have had it good for a long time.
Given this current climate, you might be concerned about your cash flow and budgeting and might be considering moving over to a fixed term mortgage. Fixed term interest rates are currently between 3.49% to 3.69% for a five-year fixed term insured mortgage. Don’t forget that if you want to lock in you can take a shorter term that will generally have a lower rate. If the net interest rate on your current variable is the same as or higher than the current fixed term rates right now, it might be time to chat about your options including potentially converting to a fixed term. Keep in mind that converting to a fixed term isn’t right for everyone. There are other factors to be taken into consideration including; payment change, income and future plans such as renovating, moving etc. Reach out to me and I will help you calculate what your potential new payment would look like and discuss the pros and cons on if converting makes sense.
If you haven’t made the most of these low interest rates, maybe now is the time to get back on the bandwagon. How much do you have saved up or how close are you to your mortgage burning party? Have you been making extra payments on your mortgage? Or maybe you just got a little carried away and have some high interest credit card debt that you can’t seem to pay off in full each month.
Don’t worry, if you aren’t as far ahead as you would like to be, we can work together to create a plan to get you back on track, the new year is a great time to work on setting goals and developing a strategy!
To continue with the Bank of Canada news, here is an excerpt of the announcement and what they had to say about the current market conditions:
“The global economic expansion continues to moderate… in particular, growth in the US remains solid but is expected to slow to a more sustainable pace through 2019. However, there are increasing signs that the US-China trade conflict is weighing on global demand and commodity prices.
Global benchmark prices for oil have been about 25% lower than assumed… The drop in global oil prices has a material impact on the Canadian outlook, resulting in lower terms of trade and national income. As well, transportation constraints and rising production have combined to push up oil inventories in the west and exert even more downward pressure on Canadian benchmark prices. While price differentials have narrowed in recent weeks following announced mandatory production cuts in Alberta, investment in Canada’s oil sector is projected to weaken further.
These developments are occurring in the context of a Canadian economy that has been performing well overall. Growth has been running close to potential, employment growth has been strong and unemployment is at a 40-year low. Looking ahead, exports and non-energy investment are projected to grow solidly, supported by foreign demand, the CUSMA, the lower Canadian dollar, and federal tax measures targeted at investment.
Meanwhile, consumption spending and housing investment have been weaker than expected as housing markets adjust to municipal and provincial measures, changes to mortgage guidelines, and higher interest rates. Household spending will be dampened further by slow growth in oil-producing provinces. The Bank will continue to monitor these adjustments.”
Weighing all of these factors, the Bank continues to feel that rates will rise over time but the appropriate pace of rate increases will depend on how the outlook evolves, with a particular focus on developments in oil markets, the Canadian housing market, and global trade policy.
I wonder if I can ask a favour; going with my theme of “New Year Financial Goals” if you hear a friend or family member talk about going through a financially tough time – maybe I can help with some budgeting, credit counselling and debt consolidation options for them. In either of these cases, would you mind passing my contact information on to them – this is very much appreciated.
I’ll be in touch again for the next announcement on March 7th, 2019.
Edmonton Mortgage Broker