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Sometimes other people and other county’s misfortunes are our gain, this has never been more true than in the case of Canadian variable mortgages. The variable rate mortgages in Canada are calculated based upon either adding or subtracting a percentage amount from the Bank of Canada Prime rate. Earlier in the year and all the way up until mid summer the Bank of Canada had been beating the proverbial rented mule of “brace for rate increases”, with many people projecting these to come before Christmas.
However, as Lee Corso would say “not so fast my friend…..”
The new and current world economy and Canadian Variable Mortgages
The latest announcements from the Bank of Canada, well summarized by a recent Globe and Mail article , point toward the Bank of Canada keeping the Canadian Variable Mortgages and the bank of Canada prime rate constant until at least mid 2012 if not longer. The real indicator for significant rate increases will be the rest of the world. When we start to see the US recover along with Europe, you can very realistically expect the prime rate to increase back to its pre – economic meltdown range of 5%.
Some action steps that clients can take NOW to capitalize on the current Canadian Variable Mortgages.
Debt repayment: We are currently at an all time low for interest rates however your credit cards and other consumer debt is still between 15% and 22%. Now would be a great time for us to meet and discuss options to dramatically reduce your consumer debt and help you pay it off dramatically faster.
Line of credit restructuring: Please feel free to reference my previous article on the dangers and costs of secured lines of credit here. The basic numbers are: assuming you have a line of credit with a regular balance of $300 000, given the difference in line of credit rates versus a rate for a Canadian variable mortgage, on a yearly basis you will be paying ~$3300 in extra interest for no reason. I cannot stress enough – if you have a secured line of credit or any of your family or friends have one please contact me so we can work through the numbers and see if there is a better fit for you.
If you are renewing your mortgage: Please contact me and I will be happy to work though your options with you to ensure you receive the very best fixed or variable mortgage for your renewal.
In summary, please always feel free to contact me directly with any mortgage questions and remember that these are great times for clients who have Canadian variable mortgages, with the future also looking very promising.