Bank of Canada Rate cut is positive news… don’t listen to fear mongers.

 FEAR..!  They say fear motivates us to do things we shouldn’t.  If you’ve been reading the News Headlines for the past several weeks, you’ve been hammered with RATE HIKE FEARS!  Everyone was saying rates were gonna go up.

It wasn’t just speculation, it was a foregone conclusion.  Almost factual!   There were headlines even reporting how much of an impact these new ‘higher rates’ would affect our lives, our budgets, our house values, our savings, etc.    We saw so-called ‘Experts’ recommending we lock into long term Fixed rates!   There was one articles telling us we should consider selling out homes!   I mean if you didn’t know better, you would think the sky was falling!

Panic was starting to set in for thousands of Canadians.  I was getting calls from concerned consumers asking if they should be doing anything with regards to their mortgage, their investments, and other personal finances.

WHERE ARE THEY NOW?

So where are all those ‘Experts’ telling us to sell our homes, hold off buying a home for another year or two or 6!!!  Where are those ‘Experts’ telling us to only ever take a 5 year fixed rate mortgage (Kevin O’Leary from 2012.. and by the way, he started a mortgage brokerage and closed in down in less than 2 years as he couldn’t compete)….  Where are the ‘Experts’ that said it’s better to rent vs. buy?    And those ‘Experts’ telling us the housing bubble is going burst… for the past 6 years!!!

A DOSE OF REALITY! 

Today, the Bank of Canada announced a 0.25% rate cut.  This has a direct affect on Variable rates.  So starting next month, if you have a Variable rate mortgage, your rate will be 0.25% lower.  On a $300k mortgage, that’s gonna put another $37/mth in your pocket!    Oooo, that’s terrible news, isn’t it?   I mean, who wants to pay less on their mortgage?  Lol!!!

And earlier today, our 5 year govt of Cda bond yield hit an all-time low of 0.80%.   We’ve never seen it that low.  Remember, fixed mortgage rates are priced from these bond yields.   So, once again, as I had predicted last week and late last year, rates aren’t going up, they are going down.… not by much, but we are in historical low territory.  And it should remain there for a while.  (forgive my T-shirt pic.. my son gave me one of these!)

As reported earlier today, I’ve been saying the opposite of what the mass media has been telling you. I didn’t believe interest rates would go up anytime soon.   The fundamentals just weren’t there.  The price of oil dropping, in a country that relies heavily on their natural resources, will put pressure on the economy… and an economy that is still struggling to create jobs.

Sorry, I can’t resist...How about this for getting it wrong.. A recent Bloomberg News survey polled 22 Economists and NOT ONE predicted a rate cut.

The govt has many tools at their disposal to stimulate the economy.   Lowering the Bank of Canada rate is just one of them.

THE POSITIVES ABOUT LOWER RATES

While an interest rate hike would be good for our $Canadian dollar, pension funds, imports, etc, it would put too much stress on the fragile economy at this time.  This isn’t rocket science folks.  Look at the facts and draw your own conclusions.   This is why I could not believe all the headlines telling us that rates would go up.  

A lower rate will stimulate consumer spending, improve our exports and manufacturing.  And let’s not forget, a lower rate will mean it costs less to pay your mortgage.  Hmmm, last time I checked, my clients wanted the lowest rate possible and were happy when I got it for them!    Maybe we should make all those Economists and business news writers pay higher rates since they want them so badly!!  Buying an investment property is more affordable!  If you’re looking to invest, consider a rental.   Ask most home investors that have bought over the last 5 years.. or 10 years, or 20 years.. or 30 years.. etc…  Do you know anyone that hasn’t done well on their investment property?

Enjoy these low rates.  Spend wisely.  Invest wisely.  Just because rates are at record lows, it doesn’t mean you have to spend like a fool.   Need advice?   Reach out to an unbiased professional.  Call an experienced Mortgage Broker.

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114 steve@mortgagenow.ca