Tuesday, February 24, 2009

Maria Mak - Burnaby Realtor -Rates - where they are going?

The Bank of Canada will be meeting again in March amidst expectations of further rate drops to stimulate our recession-burdened economy. The real question on everyone's mind is - will rates drop further, if so how much and if so, for how long? - ok so that's three questions.

The key to remember is that the Bank of Canada is governed by one of two things; Inflation or Stimulation. If they fear inflation, they will raise rates, but if they feel the need to stimulate the economy, they will lower rates. Clearly, we are still very much in a stimulus environment and as long as the Canadian economy continues to sputter along, we will remain in such. Translation: Expect Mark Carney and the Bank of Canada to follow suit by lowering rates again in March. The real question that remains unanswered is by how much? Personally, the street is asking for another half point decrease and, in fact, the markets have already priced that in. So we could very well see another half point drop which, if the banks follow suit and lower Prime accordingly, would make the Prime rate an amazingly low 2.5%.

The other question was for how long? Coupled with this would be the need to look at the trend in bond yields and how they will impact long-term rates. You don't need to worry about becoming an economist to figure it all out, but suffice to say there is room for a further drop in the long-term rates as well.

However, at one point over the next year or so, the economy will stabilize and start to swing upwards and when it does, the BOC will start to shift their focus away from stimulus and over to inflation. This will result in a rise in interest rates both long-term and short-term. And at one point, it may very well make sense to start looking at locking in your rates.

For all your creative financing, please contact Maria Mak at Sutton Centre Realty at 604-839-6368 , you will be smiling too!

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