Que. I’m buying a new home / need to renew my mortgage, should I get a Variable Rate Mortgage? Ans. Let’s take a look at the recent ( since January 2010 ), crystal ball gazing, raw Canadian Market data, economist opinion & political speak.
The last 18 months handed Canadians a rocked economy, to say the least. That said, in the final 3 months of 2009, our economy zoomed past the original forecast of the Bank of Canada of 3.3% by zipping all the way up to a very robust 5% on an annualized basis.
Our friends, the economists, ( using their collective crystal balls ), cheerfully believe that the stage has been set for another strong gain, of perhaps 4% or more, during this, the 1st quarter of 2010.
Recent Canadian financial data indicates that our core inflation rate has inched ever so closer to the 2% level. A number that the powers to be at the Bank of Canada had not expected to surface until possibly the 3rd quarter of next year.
Therefore, the Bank of Canada, via its’ latest interest rate statement & the following Federal Budget has taken micro – steps to quietly indicate its’ movement to return Canada to a more normal interest rate level. The Bank of Canada benchmark rate of 0.25% has been maintained & is pledged to sit there until July 2010.
Market pundits & economists, take this, along with the statement from the Bank of Canada that “ the risks to our inflation outlook are roughly balanced & no longer slightly tilted to the downside “ as a go ahead to start a countdown to higher Canadian interest rates.
Powered by a “ vigorous domestic demand “ and a reasonable recovery in our export markets ( kudos for Govt. backed Credit Creation ) Canada is moving forward. RBC & others believe that 2010 will see a strong housing market. Reflecting that, home prices have risen & nationally, new home construction has increased month over month by some 6.1% in February.
Rate increases…how much and when? Hands on bets are somewhat devided. July September and economists & market professionals are estimating 1 to 1.5%.
My opinion / advice? Go into your new mortgage with your eyes wide open, and get solid advice from your Independent Mortgage Broker. I personally would look at a minimum term of 3 years….all the way out to 10 years ( oui, I said Ten !! ) Get based on a serious, not cast in concrete, but a realistic financial plan. Retire healthy, early & owning your own Home!!
Trusting this has been helpful. Please contact me if you have questions.
Cheers,