|Interest Rates are going up, but don't panic!!|
|Tuesday April 12, 2011 10:06 AM|
The press tends to sensationalize any changes in mortgage rates.
Over the past few days a number of financial institutions have raised their FIXED interest rates.
FIXED rate pricing follows the bond market; therefore, they often fluctuate. Our current rates are similar to the rates of February 2011, so don't panic.
The Canadian government plays a central role in the FIXED mortgage rate market, specifically the price of government bonds and these interest rates are influenced by the bond yield (the percentage return an investor will receive).
Bonds are typically considered safer investments than stocks, especially Government bonds, and when the stock market is booming investors most likely make a higher return on investment in equities, which means there is a lower demand for bonds. Bonds then decline in value and their yields increase. On the other hand, when the Canadian economy becomes less stable and stocks do not look as enticing, the demand for bonds increases and their yields decrease.
Remember VARIABLE interest rates are linked to the Bank's Prime lending rate. For example, you may have a mortgage with a rate of Prime - 0.6%. Prime is now 3% so the current interest rate on your mortgage is 2.4%.
Financial institutions base their Prime interest rate on Bank of Canada's overnight lending rate. BOC meets eight times yearly to establish this rate and there are many factors affecting their decision. SOme of the factors they consider are inflation and the vaule of the Canadian dollar.
Click here for BOC meeting dates.
|Interest Rates Likely to start Climbing by July|
|Thursday April 07, 2011 02:34 PM|
Article by Benjamin Tal
Deputy Chief Economist. CIBC World Markets
Canada's fourth quarter growth rate of 3.3% hints of a robust start 2011. Final domestic demand accelerated to 4.7% with healthy gains in all categories except housing construction. Exports posted a more than 17% annualized gain. Corporate profits are 16% above year ago levels and businesses recorded an over 10% annualized gain in capital spending. Bottom-line improvements generally trigger an acceleration in employment growth, so we expect that another 30,000 will be added in February.
Of course, none of this negates the potential headwinds that lie ahead. Government spending should decelerate with fiscal tightening, consumers will push the savings rate even higher as borrowing costs rise and exports will feel the deceleration we expect in the global economy through 2011. Still, Canada is compared to countries that rely on imported oil or have larger fiscal imbalances.
Interest rates likely to start climbing by July
While we expect growth to slow after such a robust first quarter, our expectation is that Bank of Canada will begin raising rates by July.
|Fixed or Variable Rate?|
|Friday April 01, 2011 10:33 AM|
No Simple Answers for New Home Buyers
Paul Barker, Postmedia News • Mar. 30, 2011 |
Do you lock in or go variable? With mortgage rates tantalizingly low it is easy to see why so many people prefer the latter, but that could change if the rates start to rise.
Maria Dominelli, a mortgage specialist with independent mortgage brokerage firm Invis in Victoria, B.C., says deciding which route to choose depends on an individual or couple's short-and long-term goals, the amount of debt being carried and their overall tolerance to risk.
"I always ask clients whether they can afford to ride the wave, because there will be waves," she says. "If you cannot afford an extra couple of hundred dollars a month if rates rise, it is not for you."
Contrary to what many might think, there is not a downside to locking in, says Laura Parsons, a mortgage expert with BMO Financial Group in Calgary.
"Do your homework and if you do lock in, do not look back," she says. "It depends on the person and what they can tolerate. Some people can't sleep at night because they're worried about what the rates are going to do. In that case, of course, a variable rate would not be suitable. You may want to just know what your mortgage rate is going to be for the next five years."
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