Interest Rates – Outlook March, 2011

If you are buying any property you should understand how current interest rates on mortgages can affect you. Canada’s rate of inflation remained steady throughout the early part of 2011 despite the rise in pricing for commodities such as food and oil that occurred in many countries around the world.  Consumer prices dropped a tenth of a point in the last year to 2.3%. With the consumer prices dropping, the Bank of Canada will be able to keep current loan interest rates low for several more months. Despite the steady level of inflation, business loans interest rates in Canada could be on the rise later this year.

Interest rates are set to rise early this summer.  The Bank of Canada is expected to keep raising the current loan interest rates until they return back to their normal levels of around 3.5%. The change of rates could cause distress to both home values as well as the economy.  With current interest rates on mortgages rising, we could see more people being squeezed by the debt on their homes.  The next decision regarding current mortgage rates, such as business loans interest rates, is to be announced in March.

With current loan interest rates predicted to rise later this year, the general fear is that of a collapse in Canada’s housing market. If interest rates rise 2% by the end of 2011 Canadian home prices could fall 25-35% over the next three years. If housing prices fall by 35%, higher risk mortgages could lose a staggering $10 billion. In the past even a subtle rise of current interest rates on mortgages and business loans interest rates have proven to have a noticeable effect on the confidence of homeowners.

A rise in our current loan interest rates will always worry some people. However, the good thing is that all the predictions made thus far have been unfulfilled. Current interest rates on mortgages are still at an all-time low and will be that way for the next few months. Having the business loans interest rates at 1% is what got us through this hard recession and we have to stay positive as well as educated while we work through the upcoming year.

Second mortgage rates will also increase as the prime rate increases but because of the higher rate of interest we recommend our clients take short term second mortgages. If you have any questions or want further information regarding current loan interest rates or home equity loans in Ontario, give us a call today.