Good Morning,

I promised to keep you abreast of market conditions, so here is your personal update from me on the recent Bank of Canada announcement regarding changes to their Overnight Rate, which in most cases impacts the Prime Rate, therefore affecting variable rate mortgages.

At 9:00 am EST today, January 17^th, 2012 the Bank of Canada did what we expected them to do - they maintained their overnight rate. What this means is that the Prime Rate on variable rate mortgages or lines of credit will not change and remains at 3.00%.  We have seen no movement in the Prime Rate for over a year. 

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

 “the outlook for the global economy has deteriorated and uncertainty has increased… The Bank continues to assume that European authorities will implement sufficient measures to contain the crisis, although this assumption is clearly subject to downside risks. The Bank expects the U.S. recovery will proceed at a more modest pace going forward.  For Canada, net exports are expected to contribute little to growth, reflecting moderate foreign demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar.  In contrast, very favourable financing conditions are expected to buttress consumer spending and housing activity.”

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 percent which affects the Prime Rate of Canada.  With the target interest rate near historic lows and the financial system functioning well, there is considerable monetary policy stimulus in Canada. It is anticipated that prime rate might not actually increase until well into 2012 maybe even 2013.  When it does start to increase, it is expected to be gradual and controlled in line with economic recovery, both in Canada and globally. Remember any change to the prime rate since 1992 has only been by 0.25% at any ONE time.

Based on this recent announcement, and the anticipation that the prime rate will still remain low for the coming months, unless you feel otherwise, my recommendation for you variable rate mortgage holders would be to remain with your current variable rate product .  However, if having a fixed payment is important to you, call me so I can calculate what your new payment would look like and also if it is suitable for you.

We have seen the fixed term rates fluctuate slightly since the last announcement and are still very low at around 2.99% to 3.99%. 

The next announcement on any change to the prime rate is March 18th, 2012 at which time I’ll be in touch again.

We have fixed rates below prime!!

Take advantage of our 3 yr fixed @2.89%