Bank prime rate no change, as low as it can go. How long can it last?
Bank prime rate no change, as low as it can go. How long can it last?
In the Bank of Canada’s meeting yesterday they decided to leave the target for the overnight lending rate unchanged. As such, Bank’s prime rate will most certainly also remain unchanged at 2.25%, which just as a reminder, effectively cannot get any lower, ever.
Comments were essentially that the market has progressed as expected, which is good I would say, no wild changes or surprises. It was also re-confirmed that Bank’s Prime rate should remain as is through to the end of the second quarter of 2010. This is consistent with what we have been hearing for the past month or so. However, what I thought was interesting was from other sources regarding what is felt will happen with rates in mid to latter 2010 or by the beginning of 2011 at the latest. And that is once rates start to increase, they will likely do so in larger increments than we may expect. In the past and when the Bank of Canada was lowering it’s rate they were doing so a quarter of a point at a time (0.25%), except there was one 0.5% drop I believe. Some economists have even said that they would not be surprised if at one meeting they raised the rate by a full 1.00%! This is still a ways off, however, we should brace ourselves for steep rate hikes once this next stage is ushered in.
Given this, I recommend to a few different groups of people, that it may be in their best interest, no pun intended, to try and take advantage of the low interest rates before they go up. Here are the groups and my reasons why:
- People considering the purchase of a home, do so before rates go up so they can enjoy a nice, low, fixed rate, for as long as they can
- People who could benefit from a refinance (i.e. to consolidate debt, finance renovations, etc.) or an early renewal, again to secure a good low rate for next few to several years
- People with a line of credit for their mortgage who do not require flexibility of such a product and do not want to expose themselves to significant rate increases while also missing out on the ability to lock in a very good low interest rate for the years ahead
- People with a variable rate mortgage who will not be comfortable with rate increases, not knowing when the rates will stabilize, and/or when rates may come back down, while again, missing out on the ability to lock in a good fixed rate before they increase
Stay tuned for the next Bank of Canada update and for more information on this or a related topic please contact me at anytime here in beautiful, sunny Vancouver BC.
(604) 603-2520 | Maury@MauryLum.com | www.MauryLum.com |
