The year of 2015 started out with a frenzy as the Bank of Canada surprised many with a reduction in the overnight lending rate last month. So how does a change in mortgage rates affect you? Well, that depends on who you are and what stage you are in your life.
If you are raising your family with a mortgage and other high bills to pay a reduction in your cost of borrowing on your line of credit or your variable mortgage can be a benefit. If you are near retirement and watching your investments this may not be such good news. Either way it is a good time to review your personal situation with your financial planner or mortgage broker to make any adjustments or to be thankful you are in a good place.
Recent articles in the news provide some insight as to what is happening. I am not an economist so I will not attempt to give you an explanation into what the future may hold. However, the economy is growing at a slower rate than expected and the Bank of Canada is scaling back on their forecast and the overnight lending rate with the recent drop. We may see another coming in 2015. We may also see lenders reduce their discount on variable rate products—so rates may sit around 2.2%or higher in the coming months. For now the variable rates are quite competitive for those who can qualify and who are the right fit for this type of mortgage. On the fixed rate mortgage side we have seen low rates in 2014 with the non bank lenders and in January 2015 the banks chose to lower some of their fixed terms closer to the market rates. However, non bank lenders continue to shift rates downward. We will see how this plays out over the coming weeks.
My advice to clients is always the same—know your own budget and life situation. There are many options out there to consider and don’t get caught up in the interest rate. Work with your mortgage broker to understand the terms of the financing and set a plan that fits your needs and goals. In the end you will be in a better place and more likely to adapt to changes in the economy.
As always consult your professional advisor on money matters. I am running numbers for clients —some are making changes while others are happy to know they should stick with what they have and may simply make changes to their saving, investing and/or spending in 2015.
Some articles you may not have had the opportunity to read.
To review your current situation and plans moving forward regarding your current mortgage, plans to move or to buy your first home or investment property—call me at 604-813-8402.