Record-Low Interest Rates | What This Means For You?

Interest rates in Canada are at an all-time low. Rates are being pushed down by the uncertainty of Covid-19, and they're not expected to be rising anytime soon. The Bank of Canada hinted that interest rates wouldn't rise until 2023.

"Based on the Bank's new forecasts, this implies it has no intention of raising policy rates for several years," states Capital Economics economist Stephen Brown. "While the Bank may eventually raise its central scenario forecasts for growth and inflation, our forecasts are still consistent with the broad message in today's policy statement. That is, despite the huge stimulus, there is little chance that a surge in inflation will justify raising interest rates within the next few years."

What do these historically low interest rates mean for you?

Great news, if your rate is variable, your rate is predicated on prime, which is set currently at 2.45%. You either have a variable rate of prime (2.45%) minus or plus a spread. Ie. If you are prime -.50%, you would be 2.45% (Prime) - .50% (your discount) = 1.95%.

If you have any unsecured or secured lines of credit, student loans, certain car loans, etc., you will see low interest rates for the foreseeable future.

The spread being offered on variable rates is slowly coming down, and there might be an opportunity to reduce your current variable or fixed rate and take advantage of the historically low rates. There could be a cost to do this (penalty, legal, and/or appraisal), so we'd have to run the numbers to see if it makes sense. The best part of a variable rate mortgage is it comes with the lowest penalty, which equals 3 months of interest.

If you are currently at a fixed rate, this means you're locked in for the remainder of your term at your current rate. There might be an opportunity to break your current fixed-rate mortgage and take advantage of the low variable or fixed rates, BUT it would have to make sense. We will have to factor in a penalty and closing costs to see what the savings are.

These low rates are good for everyone, and it's just a question if you can take advantage of them now or in the near future.

Questions regarding your mortgage, or want to compare your mortgage to what is currently available? If you'd like to see what your options are, please reach out, and I'll see what we can do. Ryan Nemeth at Conexia.