Prime Unchanged But The Governor Changes His Tune
March 6, 2019
Rate Update – Hazy Expectations
May 29, 2019
As expected the Bank of Canada (BOC) left the prime lending rate unchanged today. While I was reading the report this morning it felt as if it was written by an eight year old boy staring out the window on a rainy Saturday morning….heavy sigh!
The reality of our export driven economy is that we are heavily reliant on the politics and economic policies of other countries. Given the ongoing trade disputes and the general malaise of the global economy, Canada is once again stuck in the middle. And if you’re following what the news is saying about the economy ( we haven’t owned a TV since 2014 ) I’m sure you are either asking your doctor about a prescription for Xanax or turning towards a bottle of Pinot Grigio!
But bad news can actually be good news …
If you’ve followed our blog posts over the years you’ll know that one of favourite sayings is “bad news in the economy is good news for your mortgage” that’s because bad economic news usually means bond yields decrease which means mortgage rates will go down.
The “interesting” question then becomes, how long before the good news arrives…
To find out the answer scroll down and read how today’s news relates to your mortgage, and what we are expecting the next 120 days to look like.
Key Points From The Bank of Canada Announcement
- Prime rate remains unchanged at 3.95%
- US/China trade disputes continuing
- Global economic growth slowing
- Business investment stalled due to uncertainty
How Your Mortgage Is Impacted
- Fixed rates have dropped
- The Spring Mortgage Specials are out and more seem to be coming.
- Bond Yields have levelled out
- Rate holds available up to Labour Day!
What does this mean for your mortgage?
A couple of key take aways from the BOC update was the Governor expects inflation to remain at the target 2% rate until the end 2020, but he is expecting job and wage growth to become a key factor over that period. What that means is at some point fixed rates will bottom out and will stay at that point until the signs of economic growth appear on the horizon. The key word in that last sentence is “signs”, because bond rates will move in anticipation of economic growth. So if you want to want to stay ahead of the curve, you’ll need to out anticipate the bond market by planning your mortgage financing needs 6 months in advance.
The Bottom Line:
So with the above in mind what are we advising our clients?
- Is your mortgage is coming up for maturity?
- There are a couple of strategies my team has developed to capitalize on future lower rates.
- We also have access to lenders that will pay our legal fees to transfer your mortgage.
- Capitalize on your home’s value now?
- For the first time in a long time we’ve seen real estate prices soften, and because of that some of our clients felt that they missed an opportunity to refinance their home.
- Now that we are in a spring market, sales are picking up and values are showing signs coming up as well. Now is an excellent time to revisit the possibility of utilizing the equity in your home.
- What are you doing after work?
- A recent addition to our mortgage practice is reviewing our clients cash flow needs in retirement. By taking advantage of our clients top earning years we are able to harness the power of the Manulife One mortgage product and significantly reduce, if not eliminate, our clients mortgage debt by retirement. Best of all, by harnessing the power of the Manulife One product during retirement we are able to extend clients cash flow in some cases by up to 10 years. This is huge!
As we head into the 2nd quarter it’s clear that 2019 is going to be dubbed the “year of planning”. Whereas in previous years rates were continually going down and the value of your house continually went up; you simply couldn’t make any wrong decisions! Now that uncertainty has showed up and taken centre stage, you’ll need access to some sage advice to keep you from making decisions based on fear. Lean on our experience. We’d love to show you the opportunities that 2019 has to offer.
Did you Like this post? Then you’ll Like my Facebook Page. It’s filled with current news on what’s going on in the world of real estate!
[thrive_lead_lock id=’1114′]Hidden Content[/thrive_lead_lock]
