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CategoryInterest rates

Inflation rises to highest level in 2 years…but don’t panic

Latest figures show inflation jumped 2.4% in October according to Statistics Canada… compared with 1.9% in September.    The Bank of Canada aims for an inflation rate of between 1% and 3%.    Anything over 2% can trigger the Bank of Canada to take action… Usually, a hike in the Bank of Canada Rate, which affects Variable Rate Mortgages..

However, it’s no reason to panic.  A one month inflation spike probably isn’t enough for the Bank of Canada (BOC) to take drastic action.  It’s probably gonna take consecutive months of higher inflation or other events before the BOC raise rates again.  Most experts believe the Bank of Canada will not make any changes til next year.

Throw in some Global issues like Ireland’s’ debt and the Korean conflict heating up and you get uncertainty… Uncertainty means rates should stay low for some time…

180 day rate hold at 3.73%… CMHC 2011 housing forecast

As reported earlier today, TD was the first to raise fixed rates… they are up by 0.25%.. The TD Canada Trust Broker rate is 3.94% and can be held for 120 days…  TD has been out of the game with their 5 year fixed rate for some time… Most Lenders are offering 3.49%….. But this will most definitely go up as the Bond yields are over 2.30%…click here for the chart.

There is another option that is less talked about.   A major Bank is offering a 180 day rate hold on a 5 year fixed rate for 3.73%… this may not be for everyone, but it’s an option for anyone looking to buy but hasn’t found a house… or for those with a long closing…

Interesting, CMHC released their 4th quarter forecast and were calling for moderate activity in 2011… but they also said low mortgage rates will help to drive the housing market….This latest increase shouldn’t cause panic…these are still record low interest rates…  But we’ll have to follow the trend and see if CMHC makes any adjustment in their forecast…

How will the high $Canadian dollar affect mortgage rates?

The Canadian dollar is just about at par with the U.S. dollar…  The BMO Economist sums it up well when he says “Generally speaking, from a stronger currency, consumers win and producers lose.”  As quoted in the Vancouver Sun.

And a high Canadian dollar means the Bank of Canada is less likely to increase the Target Rate which affects Variable Rates…  Any move by the Bank of Canada upwards will only drive the Canadian dollar higher…
A high Canadian dollar hurts our exports as they become more expensive for other countries to buy…  and we will probably see more cross border shopping as our strong $CAD will have more buying power…
Bottom line is that Variable Rates appear to be safe for now… enjoy the low rates…

 

Bank of Canada takes a pause with rate hikes

Bank of Canada governor, Mark Carney, held the Target Rate steady today…as expected…  Concerns about the U.S. economic recovery stalling, the Global economy and our own domestic economy were mentioned in the Press Release.

In the press release, the Bank said inflation was not a concern as it is under the 2% target.  Take all this data and it spells UNCERTAINTY.

What’s also interesting is that the Bank has adjusted it’s forecast for growth downward for the next 2 years…Great news for those in a Variable rate… Variable rates are hovering around 2.30% these days.

This makes the Variable Rate product that much more attractive…even with 5 year fixed rates in the 3.59% range.

Experts believe the rate will remain steady throughout next Spring and possibly into Fall depending on inflation and Global and domestic economic data….

Click here for the Press Release.

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