Just because the Bank of Canada cut their rate, doesn't mean your bank will too! It's a bit disappointing to hear that none of the Big 5 banks have dropped their prime rate following Wednesday's rate cut over at the Bank of Canada. It's ultimately up to the lending institution to follow the Bank of Canada's lead. Remember, the prime rate affects those with variable, not fixed rate, mortgages. This can be confusing so please drop me a line if you'd like some clarification.
Wednesday, January 21, 2015
It looks like the drop in oil has benefits other than lower prices at the pumps. Today, the Bank of Canada announced it will lower its target for the overnight rate by 0.25%-taking it down to 0.75%.
While oil’s decline is also expected to boost global economic growth, particularly in the United States, the good news pretty much ends there, according to the Bank. The oil price shock puts a lot of things at risk-most notably the inflation profile and financial stability. The Bank of Canada believes lower interest rates will provide insurance against these risks, as well as provide the support necessary to strengthen investment and growth, and bring the Canadian economy back to full capacity and the inflation target of 2%.
While it admits the outlook is uncertain, the Bank expects the economy to gradually strengthen in the second half of this year, and return to full capacity at the end of 2016-slightly later than its October prediction of the "second half" of 2016. This likely means interest rates won’t increase until sometime in 2016 as well.
If you have a variable mortgage, get ready to see some lower rates-although, depending on how your bank addresses interest rate changes, it may take a couple of months. I highly suggest taking this opportunity to keep your payments the same and pay down some extra principal! If your mortgage is up for renewal and you’re thinking about going variable, feel free to drop me a line to discuss whether this move is right for you.
Read the full story on the interest rate announcement here.
Friday, January 16, 2015
Now that the New Year is off and running, and the holiday financial hangover just beginning, many of you are likely sitting down to revamp your budgets. If finances have been tight, or if you’re thinking about buying a new home in 2015, you may want to go over your expenses and examine how much mortgage you can really afford.
The Real Life Ratio calculator, introduced by Rob Carrick of the Globe, isn’t a typical mortgage calculator. Rather, it takes into consideration your real cost of living—the numbers that don’t appear in traditional calculators, like daycare expenses and home maintenance costs.
It might be worth checking out if you have a feeling that you’re bordering the definition of “house poor” or if you’re wondering how much of a new home you can really afford. The exercise may highlight areas of your life that you have to eliminate to create some breathing room—or convince you that you really can’t afford that home in your dream neighbourhood.
If you are tight on cash, feel free to drop me a line to explore how your mortgage might be able to help in that respect.