Today the Bank of Canada lowered its target for the overnight rate by 50 basis points to 1.25 per cent.
Alarms sounded around the world on COVID-19 have the Bank of Canada taking action lowering the rate to prepare for potential consequences related to business activity in countries that are dealing with the virus.
There is no denying that COVID-19 impact will be far-reaching and will have a global impact, both emotionally and financially.
You can read the full announcement here:
For those shopping for a new home!
It will take a little time for this news to affect bank rates but you could have just saved thousands on your next (or maybe even your first) mortgage. If you have any questions on how this could benefit you give it a few days and then give me a call and we can discuss the impact it may have had to your pre-approval.
For the past few months, Fixed rates have been lower then Variable rates, this decrease may be enough to reopen the conversation for selecting a Variable rate.
We need a little more time to tell, exactly how the banks will react to the lower rate, typically we should see a decrease in both Fixed and Variable Rates, but don’t worry I have my eye on the situation and have you covered.
For those that are already Home Owners!
For Home Owners with a VARIABLE Rate!
No action needed! If the cause of the rate decrease wasn’t so grime I would suggest a little celebration as on your next statement you will see a little extra money coming off your mortgage.
I quick recommendation, don’t lower your monthly payment! If the bank adjusts your payment call them and put it back to where it was. This is a great time to at least keep everything the same and knock some months or even years of your mortgage by taking advantage of lower rates.
For Homeowners with a FIXED Rate!
No action needed!
There is actually not much that you can do anyway, your rate is already protected from events like this, whether rates go up or down there is no impact to your mortgage.
Just make the mental note that in the mortgage industry rates don’t always go up, they do come down, and that a variable rate can be a good idea.
For all Homeowners with a Mortgage
Consider increasing your mortgage payment!
Look interest rates are low, why not calculate what your payment would like if rates where to jump and just start paying that payment now.
Any additional payment that you make above your regular payment goes straight to principal, and small increases can make a huge difference.
Consider putting some extra money towards retirement or savings!
Instead of taking advantage of lower rates by paying your mortgage down faster, consider putting that extra money towards your RSP, TFSA or even start a non-registered investment portfolio and make your mortgage tax-deductible.
Consolidate some debt!
Debt consolidation can be a nasty word, but when done correctly can make a massive impact on your financial situation. Don’t be afraid to reach out to me and discuss options, its the only to know if you could be making your life way easier with a single payment every month vs 3-4.
Consider Home Renovations!
If you wanted that dream kitchen or bathroom, or your house just needs a little work now could be the time. Taking advantage of lower interest rates allows you to get the money you need to renovate without breaking the bank.
Do all four!
There is nothing stopping you from doing everything on this list! I call it a balanced approach. Put a little extra money away for retirement, a slight increase to your mortgage payment, and doing some home renovations can be all done at the same time.
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