Monday, April 11, 2011

Interest Rates: Will They Or Won't They Rise?

Up, down or nowhere at all. Once again, we are approaching another Interest Rate announcement by the Bank of Canada- this coming Tuesday, April 12. While we have no crystal ball, there are a number of factors present from which we can draw speculative expectation. The problem is that some of them are contradictory- and while in the past, some of these predicators could have meant a sure bet in any direction, the situation in which the Canadian economy is not typical.

The rising loonie and inflation remaining steady at 1.5% both suggest that now is not the time for a rate hike. In fact, many analysts are now predicting that it will be summer before we see a rise in rates.

Also, we find ourselves right in the middle of a Federal Election campaign. If history is any guide, rates will remain unchanged, as the country technically is in a state of political instability- and the Bank of Canada has traditionally stepped into a less active role when Canadians are preparing to head to the polls.

On the other hand, last week, many of the major banks raised some mortgage rates marginally- which is typically done in advance of an anticipated rate hike.

It’s about striking a balance - but the question is, in this push and pull of fine tuning the economy as it makes its way back to solid ground, how much is too much—and what does sitting still again suggest? Jim Flaherty’s proposed mortgage changes intended to tighten policy were introduced on March 18.  There has been concern raised by many that the combination of these new restrictions with the eventual rise in interest rates will have a significant impact on affordability- and that some might get squeezed out of the market.

Jagdeep Singh, B. Arch.

Real Estate Broker

647-28-SINGH

An ounce of performance is worth more than pounds of promises.

Direct Tel: 647-287-4644

Direct Fax: 866-450-9199

www.JagdeepSingh.ca

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