The Bank of Canada has announced this morning that the overnight rate will remain status quo.

Inflation in Canada remains below the B of C’s target of 2% due to economic slack which is expected to continue into early 2016. However, it is noted that higher consumer energy prices and the lower Canadian dollar will put some upward pressure on total Consumer Price Index (CPI) inflation. The CPI is an indicator of consumer prices experienced by Canadians. It is obtained by comparing a fixed basket of goods over time.

For those of you with a Line of Credit product or Variable Rate Mortgage, this means your rate will remain unchanged and stay nice and low. Given that eventually we will see Prime Rates increase it is a great time to take advantage of today’s low rates to increase your payments and pay down your mortgage faster. This has a couple valuable benefits. Firstly, you save on interest due to 100% of the increase in your payment going towards principal and NOT interest. Secondly, you become accustomed to making slightly higher payments as you will have to budget for these higher payments when Prime rate does increase. We call this “Payment Shock”.

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