Here’s a view of how prime rate has moved over the last 10 years, as compared to the Bank of Canada’s overnight target rate.
We’re clearly in uncharted territory, and not far off from the bottom. Yet, some economists are nonetheless calling for another 1/2% cut to prime.
Click chart to enlarge.
(Date source: Bank of Canada)
Would the BOC ever take the rate to zero? And the concept of going negative seems ludicrous… right?
Approcahing zero is possible, its happened in the US. And yes going negative is ludicrous because the BoC would be paying the banks to take their money.
An excellent strategy in this environment is to take an open variable, or home Equity line of credit ( both can be had for prime plus 1% (~4%)) then every 4 months get a fixed rate commitment from another lender. Its takes a little bit of diligence (3xyear to rebook rate) but you will assure yourself of getting the lowest fixed rate to lock in to and avoid “missing your window of opportunity”. Be wary of Bokers who do not offer open Variables, many lenders do not pay brokers for open Variable mortgages so find one that deals with or will suggest lenders whom they do not get remuneration from.
Good luck finding a bank or broker that lets you keep turning over pre-approvals like that. It also looks bad on your credit report to get hits every four months. Banks, brokers and new creditors will be put on watch if they see that kind of activity. That is not to mention you will never get the best deal with a pre-approval. The best deals are almost always with quick close specials.
I know of TD mortgage Specialists that can guarantee fully discounted rates with just a name and phone number. No Credit check, no body put on “watch” for that kind of activity, just standard operating procedure.
Maybe this post should be in “bank Specialist vs Mortgage Broker” section.
Chalk another one up for Bank specialists.