Posted by: Kristian Harris
On Wednesday, May 27th, the Bank of Canada announced that they will be keeping the overnight lending rate, a key interest rate for mortgages in Canada, at 0.75%.
The Bank of Canada cited inflation factors as a factor in their decision to keep interest rates at the status quo. Total CPI (Consumer Price Index) Inflation was determined to be one the low end of the BoC’s targeted 1 to 3 per cent. The drop in the price of oil was the main reason for the low inflation numbers. Core inflation (which doesn’t use ‘volatile’ items such as oil in its calculations) was around the 2 per cent mark – largely in line with the Bank of Canada’s predictions in the Monetary Policy Report released in April 2015. The depreciating Canadian dollar was a contributing factor in the 2 per cent core inflation results.
The variable rate mortgage, or VRM, remains an excellent tool for home-owners looking to pay less in interest to banks on their mortgage. Over the years, MonsterMortgage.ca has continually encouraged clients to use the flexibility afforded to them with variable rate mortgages, set their payments as if it were a fixed rate mortgage, and watch the extra dollars each month continually make their mortgages smaller and smaller each year.
Unquestionably, MonsterMortgage.ca does ask their clients to take on some fiscal prudence to add an extra $100, or $200 each month to their mortgage payments, but the strategy has continued to pay off in spades – shaving anywhere from 6 to 10 years off client’s mortgages depending on their balances and saving thousands of dollars in interest payments.
In 2015, we introduced the Monster Terminator Program to help our clients get to zero on their mortgage faster and it’s been a smash success. MonsterMortgage.ca has used to program to protect clients from rate increases, find the best mortgage products 120 days before renewal and ensuring our clients questions are answered. We would challenge Canada’s largest banks to do the same – especially because we know they simply won’t.
The Bank of Canada’s next scheduled date for announcing their decision regarding the overnight rate target is July 15th, 2015. The overnight lending rate is a key interest rate which determines the mortgage rates for home-owners with floating or variable rate mortgages and lines-of-credit. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the Monetary Policy Report due in July 2015.
As of the date of this writing, the prime rate used by Banks and Lenders in Canada is currently set at 2.85%, 2.10% greater than the Bank of Canada’s overnight lending rate. You can find more information regarding the Bank of Canada’s policies here: http://www.bankofcanada.ca/