Harry Howard
386 Ellis St # 103 V2A 4L7 Penticton, BC, Canada

Here is a reminder and reinforcement of why a variable rate mortgage is back in vogue. For the past while when one could lock in for less than 3% over a 5 year term, it was one of the rate times when it made sense to lock in. Now that 5 year fixed rates are in the 3 to 3.5% range, and variable rates are in the 2.50% range, it does not make sense to lock in. Inflation at 1.6% is well below the 2% target set by the BoC. If you need a cure for insomnia, you can read all about it.. https://www.bankofcanada.ca/2017//opening-statement-251017/

The Bank of Canada made an unexpected 0.25% increase yesterday, following on the heels of an increase last month. Historically, the BoC adjusts rates to keep Core Inflation within a band of ~2%, and in a reactive manner once StatsCan releases its findings. What is different this time is that inflation is below 2%, so why is the BoC raising rates? 1. Canada’s GDP numbers, the measure of growth and output in the economy, have surprised to the upside. This in turn could lead to ...inflation through higher wages and higher prices. Rather than waiting for possible higher inflation, BoC has made a pre-emptive strike. 2. Canadians are in debt, ridiculous amounts of debt, and not mortgage debt as much as consumer debt. Car loans are now amortised over nine years, RV and boat loan over twenty years; credit cards over one hundred and ten years. The BoC is giving people the cold bucket of water wake- up call. 3. When the economy falters, it will at some point as it always moves in cycles, the B0C needs somewhere to lower rates from. When rates are at, or close to zero you have nowhere to lower from. What does all this mean for you? Keep working hard, enjoy your home, family, friends whilst be wary of unnecessary spending. This is a time to take a look at your overall finances, see where the money is leaking out and looking to plug the holes. Pay down higher rate debt (credit cards and lines of credit) using lower rate debt (refinance of mortgage); improve cashflow; develop new money management habits so that you become a saver and not a spender. If you would like a review of your finances and debt, please call or email to see if a refinance would be a good fit for you. Harry Howard, The Mortgage Centre Interior 250-490-6731 [email protected] See more