Brokers prepare for rate announcement

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With another rate announcement around the corner, what are brokers expecting and how are they planning to capitalize on whichever decision the Bank of Canada makes?

“We’re anticipating there isn’t going to be a chance; it’s certainly not going to go up anytime soon and I believe that there’s been hints from the federal government in the last few comments made that the trend of a cut isn’t necessarily happen [either],” Leon Tucciarone of The Mortgage Centre told “So I think they’re going to keep the status quo and keep the rate the same.”

The Bank of Canada is set to make its first rate announcement Wednesday since the shocking cut to its key interest rate on January 21.

That cut to ¾ per cent from the long-held one per cent mark surprised brokers and economists alike; 22 economists who took a Bloomberg news survey just prior to the announcement did not think a drop was in the cards.

“Part of the significance of the announcement by the Bank of Canada is not the rate announcement but the fact that they surprised the markets in doing it, which would lead us to believe that there could be further shocks to the system,” Calum Ross of Verico Calum Ross Mortgage told at the time.

But with many brokers believing the bank will hold steady at ¾ per cent, what will brokers do to maximize business prospects going forward?

When it comes to the debate of fixed versus variable, Tucciarone assesses each client individually to determine their risk tolerance before advising one or the other. However, he does one preference.

“When it comes to variable versus fixed, [clients] have to make a personal decision based on risk tolerance but also you can’t avoid seriously looking at considering a fixed rate when we have historically low rates … it is inevitable rates will go up eventually, so why not lock in to a historical low rate and just enjoy peace of mind,” Tucciarone said. “On the other hand, if they have upwardly mobile income, and they have the ability to pay a little more and their goal is to pay the mortgage off quicker, then variable is the way to go and inevitably your rate is irrelevant at that point because your effective rate of interest is always lower.”

The Bank of Canada’s next rate announcement will be made at 10 a.m. on Wednesday morning.

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