| community |
Mortgage News
for Vancouver BC and the BC Lower Mainland
Dear Valued Clients:
April 22nd, 2008
The Bank of Canada has lowered its key interest rate by a half point today to 3% resulting in a prime rate of 4.75%. In a statement read earlier this morning, a “deeper and more protracted” slowdown in the US has meant that “growth in the Canadian economy has … moderated as buoyant growth in domestic demand, supported by high employment levels and improved terms of trade, has been substantially offset by the fall in net exports.” This is the most aggressive rate-cut stretch that we have seen since the aftermath of “9-11”.
Looking ahead, the Bank said that “some further monetary stimulus will likely be required to achieve the inflation target over the medium term.” However, it noted that “the timing of any further monetary stimulus will depend on the evolution of the global economy and domestic demand, and their impact on inflation in Canada.”
What does this mean for your variable mortgage or line of credit?
Hopefully, should the major banks follow suit, your next payment should reflect the rate decrease unless you have an ING, MCAP or Firstline’s (standard) variable rate mortgage which is fixed for 3 month periods. If this is the case, your rate decrease will be reflected on your next 3-month fix-cycle. Most borrowers will be charged a lesser payment on their next billing and some borrowers will have more of their payment applied towards principle thus the payment will not change. This will apply significant reduction to your amortization. If you are unsure of your mortgage payment format, please check with your respective lender’s customer service.
We are in the midst of a somewhat mediocre spring real-estate market and some may argue the current market has softened, especially off of last years pace; the variable rate mortgage affordability will only help increase demand. If you know anyone who is in the market and could benefit from my services, please pass them along and we will take very good care of them and reward you for your efforts. We will be making an announcement shortly with regard to our newest referral promotion.
This is my job and I take great pride in doing this service for all of my clients. I hope you will always think of me when you or your friends and family are looking for mortgage consulting. After all, your referral is the greatest compliment I could ever receive.
Please take time to read the article below on the forecasting of the Bank of Canada rate:
Bank of Canada lowers overnight rate target by 1/2 percentage point to 3 per cent
OTTAWA - 22 April 2008 – The Bank of Canada today announced that it is lowering its target for the overnight rate by one-half of a percentage point to 3 per cent. The operating band for the overnight rate is correspondingly lowered, and the Bank Rate is now 3 1/4 per cent.
Growth in the global economy has weakened, reflecting the effects of a sharp slowdown in the U.S. economy and ongoing dislocations in global financial markets. Growth in the Canadian economy has also moderated as buoyant growth in domestic demand, supported by high employment levels and improved terms of trade, has been substantially offset by the fall in net exports. While both total and core CPI inflation were running at about 1.5 per cent at the end of the first quarter, the underlying trend of inflation is judged to be about 2 per cent, consistent with an economy that was operating just above its production capacity.
The Bank is now projecting a deeper and more protracted slowdown in the U.S. economy. This has direct consequences for the Canadian economic outlook, with declining exports projected to exert a significant drag on growth in 2008. In addition, tightening credit conditions and softening sentiment are expected to moderate business investment and consumer spending. Nevertheless, domestic demand is projected to remain strong, supported by firm commodity prices, high employment levels, and the effect of cumulative easing in monetary policy.
The Bank projects that the Canadian economy will grow by 1.4 per cent this year, 2.4 per cent in 2009, and 3.3 per cent in 2010. Consistent with this growth profile, the economy moves into excess supply in the second quarter of 2008, and spare capacity continues to increase through early next year. However, a gradual recovery in the U.S. economy, a return to more normal credit conditions, and accommodative monetary policy should generate above-potential growth and bring the economy back into balance around mid-2010.
The recent price-level adjustments for automobiles and the effect of past changes in indirect taxes will keep measured inflation below target through 2008. The emergence of excess supply in the economy should keep downward pressure on inflation through 2009. Both core and total inflation are projected to move up to 2 per cent in 2010, as the economy moves back into balance. There are both upside and downside risks to the Bank's new projection for inflation; these risks appear to be balanced.
In line with this outlook, some further monetary stimulus will likely be required to achieve the inflation target over the medium term. Given the cumulative reduction in the target for the overnight rate of 150 basis points since December, the timing of any further monetary stimulus will depend on the evolution of the global economy and domestic demand, and their impact on inflation in Canada.