A lot of media sources like local news sources are all saying that the current Canadian central bank interest rate of 0.25% the lowest it's ever been in Canadian history is about to increase. Those sources say the increase will go up to 0.5% possibly by June 1, 2010, which is tomorrow. This interest rate increase will likely continue on to the end of the year.
My thoughts on this increase in interest rate from what I learned in ECON class in university is to decrease inflation by increasing interest rate. What this means for the current people that hold variable mortgages is an increase in their monthly mortgage so be prepared. Though this increase may not be that significant it is still pretty low so possibly no need to panic and lock yourself into a fixed mortgage rate just yet. Now for the good news. Increase in mortgage rate means decrease in housing prices, so individuals who hold a lot of equity for buying a house could take advantage of this situation and buy the home of their dreams at a slightly discounted price of the current market. Forecasters say there may be a 10-15% drop in real estate prices all around Canada by the end of the year. How much is 10-15% you say? Well for a $300,000 house that means you save $30000-$45000 on this mortgage. You can buy a new car with that kind of money!
Stay Tuned!
G.
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