The Bank of Canada last met December 5th and as expected they made no change to the overnight lending rate and as a result no change to variable mortgage rates. The prime lending rate in Canada is currently at 3.0% and new variable rate mortgages are being offered at Prime to Prime less 0.35%. The next scheduled meeting date for the bank of Canada is January 24th, 2013 and it is widely expected that the Bank will once again leave the prime rate “as is”.
One significant unknown is the so called Fiscal Cliff looming in the United States. January 1, 2013 a number of temporary US tax relief policies and spending initiatives will officially come to an end. The termination of these policies combined the lack of any replacement policies could send the ailing US economy back in to recession. As always, when the US sneezes, Canada catches a cold. Any resulting downturn in economic conditions would put downward pressure on Bank of Canada interest rate policies and variable mortgage rates.
For the short term you can expect variable mortgage rates to remain unchanged. Although there’s little incentive to take a variable rate mortgage over a similarly priced fixed rate mortgage, there can be significant benefits to remaining in a variable rate mortgage if you had previously negotiated a significant discount below the prime lending rate. The bottom line is that if you currently have a variable rate mortgage, you’d be wise to leave it alone.