The economic landscape is weighing heavy on consumer’s minds these days. The recent increases in mortgage rates and bond yields have many wondering what is going to happen with rates, how soon they will go up and how much. With interest rates having come down to such unbelievably low numbers, it was clear that it would only be a matter of time before they started their hike upwards, where this will end up no one really knows.
Homeowners are in confusion as to whether they should lock in now or stick with a lower variable mortgage rate or whether now is the time to renegotiate their mortgage to try to take advantage of a lower rate for the long term. Aaron Gampel, Scotiabanks’s deputy chief economist stated ‘My crystal ball looks rather murky at that point.” “It looks more like a bowling ball” The truth is no one is certain what will happen and economic forecasters are staying away from making predictions. Ontario mortgage rates are currently ranging between 4.25% to 5.85% .
Rob Fairholm at The Center for Spatial Economics thinks the bond market has gone too far, he expects the 10 year bond yield will be down to 3.25 % by year end and rise no higher than 3.9% by 2010. Intertest rate forecasters are predicting that there could be a risk of inflation due to the coordinated global efforts to stimulate economic growth. However Fairholm is not one who expects there will be a rise in inflation with the rise in unemployment and the general uncertainty.
Chief economist Craig Alexander at TD Bank Financial Group feels there should be no risk of price inflation or a resulting increase in interest rates for the next 2 years. He predicts that US banks will be much more conservative in their lending practices until they have rebuilt their capital reserves which could slow down the recovery and also put off the risk of inflation.
Canadian Homeowners considering their mortgage options over the next couple of years should have time to consider their options.
Laura Fernandez is a sales representative with Royal LePage R.E.S./Johnston & Daniel Division. Laura is a contributor to the Muddy York Real Estate Blog. Laura’s website is located at www.laurafernandezrealtor.com.
Source: Originally taken from an article by James Daw of the Toronto Star.
