Search This Blog

22 July 2009

Dave's Email 07/21/09: Bank Rate, No Change

As expected no change to the bank rate, as there is no where for the rate to go… There is still room for one more drop if things become very desperate, so the Bank of Canada wants to keep this “Life Preserver” close at hand, in case things get worse.

Bank of Canada maintains overnight rate target at 1/4 per cent and reiterates conditional commitment to hold current policy rate until the end of the second quarter of 2010
OTTAWA – The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/4 per cent. The Bank Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent.
The global economy has suffered an intense, synchronous recession and considerable excess supply has opened up. There are now increasing signs that economic activity has begun to expand in many countries in response to monetary and fiscal policy stimulus and measures to stabilize the global financial system. However, the recovery is nascent. Effective and resolute policy implementation remains critical to sustained global growth.
The dynamics of the recovery in Canada remain broadly consistent with the Bank's medium-term outlook in its April Monetary Policy Report (MPR). Stimulative monetary and fiscal policies, improved financial conditions, firmer commodity prices, and a rebound in business and consumer confidence are spurring domestic demand growth. However, the higher Canadian dollar, as well as ongoing restructuring in key industrial sectors, is significantly moderating the pace of overall growth.

For those like myself, I had to look up what “nascent” meant.

nas⋅cent 
–adjective
1.
beginning to exist or develop: the nascent republic.

2.Chemistry. (of an element) in the nascent state.


Good news for rates is that things are finally starting to calm down in the bond markets and we have seen a drop in the longer fixed rate mortgages.

We are not back to the sub 4.00% rates on 5 year fixed rates “yet”, but things have come a long way since we shot up to 4.69%, looking like 5.00% or higher was on the near horizon. We have to remember that dealing with historical lows on rates, combined with historical recessionary economic pressures, any changes in rates can quickly become exaggerated. This explains the previous spike in the bond market.

For those who locked in at previous 3.60% – 3.80% for 5 years fixed rate, it was the right thing to do. There is really no down side to getting the lowest rate in the last 75 years.

My best 5 year fixed rate is now down to 4.12%, (With still a potential for rates to come down further.)

4 weeks ago, I had a lengthy debate with a mutual fund manager about the over heated bond market, but he was still of the opinion that rates will continue to climb. I guess when we are dealing with historical low rates it is easy to come to that conclusion, but I thought that was still a long term prediction as we are still feeling the effects of this economic slump.

Over the last 4 weeks the 5 year fixed mortgage rate fell .25%.

I wonder if the fund manager still has the same prediction.

What is really exciting and is starting to show up on the radar once more is some of the variable rate mortgages.

When the “Prime minus” mortgages shot up to Prime +1.00, some lenders shot up to Prime +1.50%, again we are seeing signs of that exaggerated response.

My best Variable mortgage now Prime +.25%.

“Effective rate of 2.50%”

We may even see “PRIME RATE” mortgages return as well.

So if you have a mortgage maturing in the immediate future or could benefit from lowering your rate or consolidating your debts, going back into a variable rate mortgages, could give the opportunity for fixed rates to drop even more.

This can also be a great “penalty reducer” for those still stuck in a higher fixed rate, and your current bank holding you hostage with a really big penalty, dropping the rate all the way down to 2.50% recovers a larger portion of that penalty every month you stay variable.

It can also be an effective tool to significantly lower your current monthly payment on your mortgage or other credit balances in these hard economic times.


Remember, for every $100,000 in mortgage your monthly payment could be as low as $356.80 per month.


David Kendall
Mortgage Agent License # M08004045

211 York Road, Unit 3, Dundas, Ont. L9H 1M9 OAC Mortgages Brokerage License # 10928 An independently owned and operated franchise of the Mortgage Alliance Network

No comments:

Post a Comment

Mortgage Alliance Oac Mortgages

As a registered franchise of the Mortgage Alliance Network, we have a number of mortgage professionals who can bring you the choice, convenience, and counsel you need to get the RightMortgage®. Working with over 40 lenders (some offered exclusively through brokers) we'll provide unbiased guidance in your mortgage decision.

We are legislated by the Ministry of Finance FSCO and our brokerage license is 10928.

We are dedicated to educating our clients about their mortgage! We want you to be well informed and comfortable with the mortgage you have and the options available to you. This blog is intended to offer information, updates, current mortgage products and current rates.

Please provide your feedback and let us know if there is anything else we can provide to help you in your mortgage process.