17 Jan

BANK OF CANADA INCREASES PRIME RATE BY .25%

General

Posted by: Sheryl Elsom

As expected The Bank of Canada increased Prime Rate by .25% today and said more hikes are likely to come. Prime rate with all banks, credit unions and non-bank lenders with the exception of TD Bank is now at 3.45%. TD Bank’s Prime Rate is at 3.60%.

Despite this being the third .25% increase in Prime Rate since July 2017, it does not mean borrowers should immediately consider locking into a fixed term. For example many borrowers have deep discounts on their variable rate mortgages which results in significant interest savings when compared with today’s fixed mortgage rates.

There are also other considerations when deciding on whether to lock in your variable rate mortgage such as:
-whether property is owner occupied or rental
-locking in will likely result in higher monthly payment
-if you refinance or sell the property the penalty on a variable is 3 months interest vs. 4%-5% of the mortgage balance in a 5 year fixed depending on your lender
-depends on your actual variable rate
-how long you plan on keeping the property
-the amount of your mortgage
-the amount of equity you have
-whether you can sleep at night when there is another rate hike

Here are some facts to assist in making your decision:
-Bank of Canada reviews Prime Rate 6-8 times a year
-increases have typically been .25% at a time so you have time to consider locking in
historically borrowers with a variable rate have paid less interest over life of the mortgage ( I can provide historical data for your review)
-in 2010 prime rate increased by .25% three times during the year and then remained the same until 2015 when it dropped by .50% where it remained until July 2017

I ENCOURAGE YOU TO GIVE ME A CALL TO DISCUSS BEFORE LOCKING IN SO YOU CAN MAKE AN INFORMED DECISION BASED ON YOUR NEEDS AND GOALS

I CAN BE REACHED AT 778-689-6843