Interest rate increases this year?

[username]

Originally Posted by Red

But higher rates are preferred as they are an indication of healthy economy and prosperity (to a point) Generally governments use rates to control inflation.

Actually, it's the BOC which has no link to the government of Canada. It operates as a seperate entity, as such politics can't influence the BOC's rate decisions.

The BOC's mandate is to keep inflation at its target of 2.2% and interest rates are its main tool for achieving this. So it's not generally used to control inflation, it's what controls inflation.

[chemgear]

Originally Posted by username

The BOC's mandate is to keep inflation at its target of 2.2% and interest rates are its main tool for achieving this. So it's not generally used to control inflation, it's what controls inflation.

They changed it to 2.2%? I thought it was an even 2.

[Mortgage Made Easy]

This is a great thread! I am a couple of days late in putting my 2 cents but better late than never! LOL

It is quite difficult to predict when rates will rise... even the Economists have been way off for the past few years. They get paid lots of money to predict or I should say guess what will happen next.

In any case, a quick way to watch what 5 year fixed rates are doing is to monitor the 5 Year Bond Yield (this is not the holy grail but it does help). The lenders currently have about a 1.40% to 1.70% to the 5 year bond. Today the bond yield is 1.23% and if you add the tolerance then the expected range for the 5 year fixed rate should be 2.63% to 2.93%. Unfortunately, you probably will not see 2.63% rates from banks as the bond is too volatile at the moment.

However, we may see some rates lower if the bond stays low for a bit more.

Variable Rate talk --- it should be noted that Variable rates is not for everyone. First you need to qualify for variable rates using the Bank of Canada rate which is 4.79% today. Then you need to have the budget in place and ability to sleep at night and not think about... it is similar to investing in the stock market.

A simple strategy for those thinking about locking in is to consider increasing your monthly payment to as if you took a 5 year fixed (or higher). This will give you the ability to take advantage of the low rate and save on interest.

The next trick is to either increase your payment when Prime goes up... maintaining the spread or if times are tough, absorb the increase. If you have a variable today, your payments should be set higher to take advantage of the low rates today.

I had a variable rate at one point when Prime was 4.75%. When rates start to rise, it should be incremental. The economy will not be able to handle quick and significant increases too quickly.

Hopefully that was not too long winded...

[Ryan Coke]

Ok so what would someone likely get for a variable right now? Prime -.5, so about 2.5%? I have a hold in a 2.89 fixed, and while I have often been variable, I am leaning toward fixed in this case since I see minimal likelihood of rates further decreasing, and significantly higher odds of it going up. And if the numbers above are correct, then after only a 0.5% increase I would be behind compared to going with the fixed.

Thoughts?

[Mortgage Made Easy]

Originally Posted by Ryan Coke

Ok so what would someone likely get for a variable right now? Prime -.5, so about 2.5%? I have a hold in a 2.89 fixed, and while I have often been variable, I am leaning toward fixed in this case since I see minimal likelihood of rates further decreasing, and significantly higher odds of it going up. And if the numbers above are correct, then after only a 0.5% increase I would be behind compared to going with the fixed.

Thoughts?

Full privilege 5 year Variable start at 2.30% and restricted/ conditions apply variable rate starts at 2.20%.

Full privilege 5 year fixed start at 2.82% (High Ratio only) or 2.84% (conventional and high ratio) and the restricted / conditions apply fixed rate starts at 2.74%.