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
Here’s a warning to all…. Watch out for the BANKS to increase their Variable rate mortgage pricing. History tells us that when the Bank of Canada lowers their Target Rate, and the Bank Prime falls, Variable rate mortgage pricing increases.
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