The Bank of Canada just dropped the prime interest rate by 0.25% making it….0.25%. The federal banks quickly followed.
Here are the 6 things you should do right now.
- Call your banker/mortgage broker and reduce your mortgage payments as close to interest-only as possible. Do not go into negative-amoritzation (i.e. where your loan gets bigger).
- If you don’t already have a reserve fund account, open one. High interest savings accounts are good, but 1% doesn’t really matter.
- Set up an automatic transfer to your savings account for your an amount equal to your current debt service payment minus the new payment amount. You’re banking the savings on your mortgage and building up your reserve fund. I agree with Don Campbell that we’re still looking at 18 months before we see serious sustained growth in Canada again. Make sure you can stay above water until then.
- Watch what Mark Carney and the Bank of Canada are saying. Eventually the interest rate will go back up.
- If you’re losing sleep at night, lock your mortgage rate in. If rates start going up or you have better things to do with your time.
- Don’t forget, any interest rate below 10% is just fine. Don’t ditch a good bank or mortgage broker over a half percent.
Now go and pick up the phone.