Bank of Canada Rate Announcement Dec 5th, 2018

Diane Gogar • Dec 05, 2018

The Bank of Canada today maintained its target for the overnight rate at 1 ¾ per cent. The Bank Rate is correspondingly 2 per cent and the deposit rate is 1 ½ per cent.

The global economic expansion is moderating largely as expected, but signs are emerging that trade conflicts are weighing more heavily on global demand. Recent encouraging developments at the G20 meetings are a reminder that there are upside as well as downside risks around trade policy. Growth in major advanced economies has slowed, although activity in the United States remains above potential.

Oil prices have fallen sharply since the October Monetary Policy Report (MPR), reflecting a combination of geopolitical developments, uncertainty about global growth prospects, and expansion of U.S. shale oil production. Benchmarks for western Canadian oil – both heavy and, more recently, light – have been pulled down even further by transportation constraints and a buildup of inventories. In light of these developments and associated cutbacks in production, activity in Canada’s energy sector will likely be materially weaker than expected.

The Canadian economy as a whole grew in line with the Bank’s projection in the third quarter, although data suggest less momentum going into the fourth quarter. Business investment fell in the third quarter, in large part due to heightened trade uncertainty during the summer. Business investment outside the energy sector is expected to strengthen with the signing of the USMCA, new federal government tax measures, and ongoing capacity constraints. Along with strong foreign demand, this increase in productive capacity should support continued growth in exports.

Household credit and regional housing markets appear to be stabilizing following a significant slowdown in recent quarters. The Bank continues to monitor the impact on both builders and buyers of tighter mortgage rules, regional housing policy changes, and higher interest rates.

Inflation has been evolving as expected and the Bank’s core measures are all tracking 2 per cent, consistent with an economy that has been operating close to its capacity. CPI inflation, at 2.4 per cent in October, is just above target but is expected to ease in coming months by more than the Bank had previously forecast, due to lower gasoline prices. Downward historical revisions by Statistics Canada to GDP, together with recent macroeconomic developments, indicate there may be additional room for non-inflationary growth. The Bank will reassess all of these factors in its new projection for the January MPR.

Weighing all of these developments, Governing Council continues to judge that the policy interest rate will need to rise into a neutral range to achieve the inflation target. The appropriate pace of rate increases will depend on a number of factors. These include the effect of higher interest rates on consumption and housing, and global trade policy developments. The persistence of the oil price shock, the evolution of business investment, and the Bank’s assessment of the economy’s capacity will also factor importantly into our decisions about the future stance of monetary policy.

Information note

The next scheduled date for announcing the overnight rate target is January 9, 2019. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR at the same time.

Here are the announcement dates set for 2019.

  • January 9th 2019*
  • March 6th 2019
  • April 24th 2019*
  • May 29th 2019
  • July 10th 2019*
  • September 4th 2019
  • October 30th 2019*
  • December 4th 2019

* Monetary Policy Report published

DIANE GOGAR
MORTGAGE PROFESSIONAL
CONTACT ME

Understanding Payment Frequency

By Diane Gogar • 08 May, 2024
You’ve most likely heard that there are two certainties in life; death and taxes. Well, as it relates to your mortgage, the single certainty is that you will pay back what you borrow, plus interest. With that said, the frequency of how often you make payments to the lender is somewhat up to you! The following looks at the different types of payment frequencies and how they impact your mortgage. Here are the six payment frequency types Monthly payments – 12 payments per year Semi-Monthly payments – 24 payments per year Bi-weekly payments – 26 payments per year Weekly payments – 52 payments per year Accelerated bi-weekly payments – 26 payments per year Accelerated weekly payments – 52 payments per year Options one through four are straightforward and designed to match your payment frequency with your employer. So if you get paid monthly, it makes sense to arrange your mortgage payments to come out a few days after payday. If you get paid every second Friday, it might make sense to have your mortgage payments match your payday. However, options five and six have that word accelerated before the payment frequency. Accelerated bi-weekly and accelerated weekly payments accelerate how fast you pay down your mortgage. Choosing the accelerated option allows you to lower your overall cost of borrowing on autopilot. Here’s how it works. With the accelerated bi-weekly payment frequency, you make 26 payments in the year. Instead of dividing the total annual payment by 26 payments, you divide the total yearly payment by 24 payments as if you set the payments as semi-monthly. Then you make 26 payments on the bi-weekly frequency at the higher amount. So let’s use a $1000 payment as the example: Monthly payments formula: $1000/1 with 12 payments per year. A payment of $1000 is made once per month for a total of $12,000 paid per year. Semi-monthly formula: $1000/2 with 24 payments per year. A payment of $500 is paid twice per month for a total of $12,000 paid per year. Bi-weekly formula: $1000 x 12 / 26 with 26 payments per year. A payment of $461.54 is made every second week for a total of $12,000 paid per year. Accelerated bi-weekly formula: $1000/2 with 26 payments per year. A payment of $500 is made every second week for a total of $13,000 paid per year. You see, by making the accelerated bi-weekly payments, it’s like you end up making two extra payments each year. By making a higher payment amount, you reduce your mortgage principal, which saves interest on the entire life of your mortgage. The payments for accelerated weekly payments work the same way. It’s just that you’d be making 52 payments a year instead of 26. By choosing an accelerated option for your payment frequency, you lower the overall cost of borrowing by making small extra payments as part of your regular payment schedule. Now, exactly how much you’ll save over the life of your mortgage is hard to nail down. Calculations are hard to do because of the many variables; mortgages come with different amortization periods and terms with varying interest rates along the way. However, an accelerated bi-weekly payment schedule could reduce your amortization by up to three years if maintained throughout the life of your mortgage. If you’d like to look at some of the numbers as they relate to you and your mortgage, please don’t hesitate to connect anytime; it would be a pleasure to work with you.

Protect Yourself at Renewal

By Diane Gogar • 01 May, 2024
It’s a commonly held belief that if you’ve made your mortgage payments on time throughout the entirety of your mortgage term, that the lender is somehow obligated to renew your mortgage. The truth is, a lender is never under any obligation to renew your mortgage. When you sign a mortgage contract, the lender draws it up for a defined time, so when that term comes to an end, the lender has every right to call the loan. Now, granted, most lenders are happy to renew your mortgage, but several factors could come into play to prevent this from happening, including the following: You’ve missed mortgage payments over the term. The lender becomes aware that you’ve recently claimed bankruptcy. The lender becomes aware that you’re going through a separation or divorce. The lender becomes aware that you lost your job. Someone on the initial mortgage contract has passed away. The lender no longer likes the economic climate and/or geographic location of your property. The lender is no longer licensed to lend money in Canada. Again, while most lenders are happy to renew your mortgage at the end of the term, you need to understand that they are not under any obligation to do so. So how do you protect yourself? Well, the first plan of action is to get out in front of things. At least 120 days before your mortgage term expires, you should be speaking with an independent mortgage professional to discuss all of your options. By giving yourself this lead time and seeking professional advice, you put yourself in the best position to proactively look at all your options and decide what’s best for you. When assessing your options at the time of renewal, even if the lender offers you a mortgage renewal, staying with your current lender is just one of the options you have. Just because your current lender was the best option when you got your mortgage doesn’t mean they are still the best option this time around. The goal is to assess all your options and choose the one that lowers your overall cost of borrowing. It’s never a good idea to sign a mortgage renewal without looking at all your options. Also, dealing with an independent mortgage professional instead of directly with the lender ensures you have someone working for you, on your team, instead of seeking guidance from someone with the lender’s best interest in mind. So if you have a mortgage that’s up for renewal, whether you’re being offered a renewal or not, the best plan of action is to protect yourself by working with an independent mortgage professional. Please connect anytime; it would be a pleasure to work with you!
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