Bank Rate stays the same, now what?

Governor Stephen Poloz announced for the ninth consecutive time that the benchmark rate would remain unchanged at 1.75%. 

During the past 12 months, nearly 40 other central banks from around the world determined that rate cuts where the only way their economies would be able to remain competitive and help stave off deeper threats of potential recisions. 

Keeping our benchmark rate the same is a sign of Canadian Financial strength and is something that Canada’s can be proud of. However, everything is far from perfect for Canada, there are huge unknowns as the US and China Trade war is still unsettled, the new American free-trade deal needs to be ratified by US officials, and Brexit has been pushed back to January 31 2020. Let’s also not forget also about Donald Trump’s current impeachment trial.

The Bank of Canada recognizes these issues and is monitoring there impact on both consumer spending and housing activity. Meaning that if imported goods start costing us more, and our ability to afford our housing costs (aka mortgages) is impacted, the Bank of Canada will need to act.

So to say that global drama may change the BOC’s mind overnight and force it to take a different stance is an understatement. But for now, Canadians should take pride in our countries financial stability that even while facing internal and global political challenges our economy stands strong.

Needed Action

Since the overnight benchmark has stayed the same there is likely not much you need to do, mortgage rates are not going to rise substantially until we see more stability both politically and financially around the world.

But (of course, there’s a but) every Canadian is currently presented with an opportunity to take advantage of these low mortgage rates that we are currently presented with.

So here are a few little things you can do to take advantage of low-interest rates:

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 three!

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.