While oil's decline is also expected to boost global economic growth, particularly in the United States, the good news pretty much ends there, according to the Bank. The oil price shock puts a lot of things at risk-most notably the inflation profile and financial stability. The Bank of Canada believes lower interest rates will provide insurance against these risks, as well as provide the support necessary to strengthen investment and growth, and bring the Canadian economy back to full capacity and the inflation target of 2%.
While it admits the outlook is uncertain, the Bank expects the economy to gradually strengthen in the second half of this year, and return to full capacity at the end of 2016; slightly later than its October prediction of the "second half" of 2016. This likely means interest rates won't increase until sometime in 2016 as well.
Have you chatted to a financial advisor about a Tax Free Savings Account
or some RRSP contributions to trigger a potential income
tax refund this year as your
payments continue to remain low and potentially even drop? If you don’t
have a financial advisor, let me know and I’d be happy to recommend one to
you.
On another note, now that the credit card statements are starting to
arrive, if you or anyone you know just got a little carried away and have some high interest credit card debt that they can’t seem to pay off in full each month, now is a great time to chat
about options with rates so low. Let’s
budget and plan together - maybe you are planning a renovation project soon or
purchasing a second home or rental property – chat to me about your options
….it’s never too late to start planning.
Even though there is uncertainty of the economic
outlook at this time, the bank did remind us that when the economy continues on
a more upward direction and
sustainable long term, rates will rise.
Remember, that any increase to the prime rate since 1992 has only been by
0.25% at any ONE time, so you won’t see a large significant increase all at
once.
Fixed rates have actually dropped slightly since the last announcement
and are around 2.79% to 3.09% for a five year fixed term.
Based on this recent announcement, and the anticipation that the prime
rate will still remain low for a while now, unless you feel otherwise, I’d
recommend that you remain with your current variable rate product as the
interest is lower than a fixed term rate right now. However, if having a
fixed payment is important to you, call me so I can calculate what your new
payment would look like and also if it is suitable for you. The next
announcement on any change to the prime rate is March 4, 2015 at which time
I’ll be in touch again.
I wonder if I can ask a favor, if you hear a friend or family member
talk about going thru a financially tough time – maybe I can help with some budgeting, credit counselling and debt consolidation options for them. It is also that time of year that many think
about what they want to accomplish this year – if buying their first home is on the “wish list”, would you
mind passing my contact information on to them – this is very much appreciated.
