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Tagbank of canada rate

Bank of Canada says no rate hikes, but possible rate drops!!

stephen poloz  Last week, the Bank of Canada governor, Stephen Poloz, held the first of 8 scheduled meetings to set the Target Rate.    This is the rate used to set the Bank Prime rate which currently sits at 3.00%.   No surprise, no change in the rate.  It has been the same since Sept 2010.

From 2011 to 2013, the previous Bank of Canada governor, Mark Carney, continually announced of a pending rate increase.   But late last year, Poloz changed the tide when he announced it could be a few years before rates go up.   One of the key drivers for rate hikes is inflation.  The BoC target for inflation is between 1% and 3%.  If inflation goes above 3%, we can expect rate hikes.

Inflation is not a concern.  In fact, there are concerns about deflation as the current inflation rate sit at 1.2%.  Some experts believe we could see the BoC rate drop.  Great news for anyone in a Variable rate.   We are also seeing the govt of Cda bond yields drop.   Friday’s close was down to 1.59% for 5 yr bonds.  Haven’t seen that level since June 2013.   This means Fixed mortgage rates will probably go down further. Continue reading “Bank of Canada says no rate hikes, but possible rate drops!!”

Bank of Cda doesn’t change rate…U.S. Fed not to raise rates until 2015?

Bank of Canada announced they were keeping the Target Rate unchanged today, during their 6th of 8 regularly scheduled meetings for 2012.  (This is not a recording..Lol!)

A more interesting topic is the U.S. Fed.  There was an article last week that caught my eye.   The article quotes the San Francisco Federal Reserve Bank president as saying he doesn’t believe the U.S. Fed will raise rates until 2015.  And even if you don’t agree with that forecast, we must acknowledge that US Fed Chairman Ben Bernanke has stated he doesn’t forecast any increases until 2014.

Why is this important for Canadians to follow?  They say when the U.S sneezes, Canada catches a cold.   There’s a lot of truth to that statement.  The U.S. is our biggest trading partner.   History tells us we follow U.S. economic policies and trends.

CANADA MAKES IT’S OWN PATH

But something changed in 2008.   The U.S. had a financial meltdown.  The entire world was impacted and pushed into a global recession.   Somehow, Canada came out of this with minimal damage.   No housing crash.  No Bank failures.  No meltdown.   In fact, many sectors our industry have flourished including our housing industry.   We don’t have any mortgage default problem.   Our unemployment rate is 7.3% compared with the 30 yr average of 8.4%.   And our Banks are reporting $billion quarterly profits.    We are the envy of the world….financially speaking.

CDA GOVT CONTINUES TO FOLLOW US GOVT

Still, the Cda govt continues to follow the U.S. Fed with regards to any rate increases or decreases.  After all, we are still a very small economy compared with the U.S. and the rest of the world.  The Bank of Canada has not increased the Target Rate for 24 months.  Bank Prime currently sits at 3.00%.   And many economists believe we won’t see any increase until late 2013 or even 2014.   This leads me to believe mortgage rates will remain low for some time to come.

BUT WHICH MORTGAGE TERM SHOULD YOU CHOOSE?

The big question is which mortgage term to choose today… short or long?  fixed or variable?   The answer depends on you…. your goals, plans, financial strategy, risk tolerance, etc.   Each of us has different needs… Product selection is very different today.   There is an interested Variable rate product at Prime less 0.35% that has my attention.  5 yr fixed at 3.19% and 3.09% are still available… not a bad option for most of us…. My best advice is to get some advice.   Speak with a qualified, unbiased professional.  Speak with a Mortgage Broker.   A Mortgage Broker doesn’t work for any one Bank.. they can offer a wide variety of products from a large number of Lenders….

As always, if you have any questions or comments, feel free to contact me.

Steve Garganis

steve@mortgagenow.ca

416 224 0114

Wanna know where rates are going? Look at 2 yr bond yields.

Probably the most popular question asked is, “where are rates heading?”  Or “when will they go up?”   Let’s face it, if you have a mortgage or are invested in real estate, then you better know the answer or understand what affects rates.  After all, interest rates can make or break a housing market.

We decided to take a few minutes to explain how you can follow the indicators that affect interest rate movement….  We won’t make you a Financial Expert, but you will gain a better understanding of what affects rate movements…

My first suggestion is to stop paying so much attention to the news or TV… (apologies to my media friends)… but the wild headlines are there to grab your attention…  it’s not that difficult to understand…

Last week, the Bank of Canada met for the 5th time in 2012.   There are 8 scheduled meetings each year… (and by the way, this helps to keep rate movement and monetary policy more predictable…. the more predictable a Govt is, the more stable it’s economy is.)   The Key Rate is set during these meetings… this rate directly affects Variable rate mortgages…. No surprise, the Bank of Canada Governor, Mark Carney, kept the rate unchanged.

That means Bank Prime is still 3.00%.   And with more negative economic news from Greece, Spain, other parts of Europe, the U.S, and now Canada, it’s safe to say rates should remain flat for some time……(remember, bad economic news usually means rates will drop or stay low).

So the Bank of Canada’s Key Rate (also known as Target Rate or Overnight rate) directly affects Variable rate mortgages… but indirectly, they also affect Fixed Rates.   A better short term indicator to watch is the 5 yr Govt of Cda bond yield.   We watch this to see where fixed rates are headed in the short term… say, over the next few days or or few weeks.   A good long term indicator for Fixed rates is the 2 yr Gov of Cda bond yields.   Financial Experts  pay very close attention to this index if they want to know where rates are going in 6 months or longer.  And at present, the 2 yr yields are very low…..

Bottom line, rates should remain low for some time…   Not so hard to follow, right?

And not to confuse you, but historically, Fixed rates usually go up ahead of Variable rates…. so we need to watch Bond yields together, with the Bank of Canada’s Key Rate to gauge where rates are going…

Hope this helps… and as always, feel free to call or email me…

Steve Garganis

416 224 0114

steve@mortgagenow.ca

Bank of Canada suggests rate hikes soon…

The Bank of Canada met on Tuesday for the 3rd of eight scheduled meetings this year to set the Bank of Canada rate.  As expected, no rate change… But there were some language in the meeting that suggests we could start to see rates go up as early as this year…. here’s an article from The Star and reaction from TD’s Economist.

In short, it appears and I stress the word, appears, as though Mr. Carney is warning us that interest rates will be rising sometime soon.   But Economists aren’t buying into that warning just yet.   There is still too much uncertainly about the global, U.S. and domestic economies.    And as long as these concerns persist, then interest rates should remain low.

SOME EXPERTS DON’T BELIEVE ALL THE DOOM AND GLOOM STORIES

It’s true, we have experienced emergency interest rates for over 3 years now…  It’s no secret the govt is concerned about Canadians get into too much debt.  You’ve heard the figures.  The average Canadians owes around 153% of their annual income…. concerns about a housing bubble.   But how does that compare with the rest of the world?  Here’s an interesting article from the Financial Post’s Andrew Coyne, which says there are other countries that carry 200% and 300% of their annual income in personal debt… there doesn’t seem to be the level of concern about their economies.  So why are we in such a panic?

It appears we are at a point where rates could go up but a lot of things would have to fall into place before that happens… it could take 6, 9 months or even a few years before that happens… maybe longer…?   Any rate increase is sure to be slow….  Don’t panic… if you see an opportunity where you can benefit from these low rates, then act on it… don’t let the media scare you into inaction or lack of action…..

And as always, speak with a professional that can discuss and explain the different mortgage products and trends… make an informed choice.

No surprise, Bank of Canada keeps rate the same

No real surprise here… Just about everyone expected the BOC to keep the Key Rate unchanged at today’s fifth of eight scheduled meetings.   This keeps the your Bank Prime lending rate at 3.00%…. Here’s

We can thank a slower than expected U.S. recovery and the European debt crisis…   With all this uncertainty in the global economy, it appears interest rates won’t go up until there is some positive news…

Most experts fee that no change will occur til later this year and some are even forecasting no rate hikes til next year.

The BOC did hint they do want to raise rates but are being cautious in their approach.  Here’s a report from CBC.ca.

Enjoy the low rates..