In the United States, the Federal Reserve has said it will hold its fund rate at effectively zero until the unemployment rate falls to at least 6.5% and inflation expectations hit 2.5%. U.S. unemployment is currently sitting at 7.3%.
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Toronto, Canada (PRWEB) October 09, 2013
Canadalend.com, the leading low-cost, private mortgage solution provider in Canada, is responding to reports suggesting the Bank of Canada may not raise interest rates until 2016, and explaining what kind of impact this will have on first-time home buyers.
“In the United States, the Federal Reserve has said it will hold its fund rate at effectively zero until the unemployment rate falls to at least 6.5% and inflation expectations hit 2.5%. U.S. unemployment is currently sitting at 7.3%, while inflation is at one percent year-to-date,” says Bob Aggarwal, president of Canadalend.com. “Because the Canadian and American economies are so entwined, it is highly unlikely that the Bank of Canada will raise its overnight benchmark rate, which the prime mortgage rate is tied to, in advance of the U.S.”
In light of the weak U.S. economy, some economists speculate that the Bank of Canada may not raise its benchmark interest rate until late 2014 or early 2015; others predict the Bank of Canada will not raise interest rates until 2016. The Bank of Canada has held its overnight lending rate at one percent since September 2010, and signalled that it wouldn’t consider raising it until the underlying economy strengthens. (Source: Babad, M., “Bank of Canada may not hike interest rates until 2016: Scotiabank,” The Globe and Mail, October 3, 2013; http://www.theglobeandmail.com/report-on-business/top-business-stories/bank-of-canada-may-not-hike-interest-rates-until-2016-scotiabank/article14675055/.)
“That may take a while,” Aggarwal says. “According to the Bank of Canada, our economy needs to grow by more than 2.5% annually, but in the year leading up to this past June, Canada’s growth averaged just 1.4%. The Bank of Canada expects growth to increase to 2.7% in 2014 and 2015, though this growth is highly correlated with how well the U.S. economy does.” (Source: “Monetary Policy Report Summary,” Bank of Canada web site, July 2013; http://www.bankofcanada.ca/wp-content/uploads/2013/07/mpr-summary-2013-07-17.pdf.)
According to Aggarwal, while the Bank of Canada has held its overnight lending rate at one percent, this has not prevented Canada’s big banks from raising their interest rates. At the beginning of 2013, Canada’s big banks were offering five-year fixed mortgages with interest rates of 2.99%; today, they are near 3.89%.
“The odds of Canada’s big banks lowering their mortgage rates are remote,” Aggarwal concludes. “That’s because Canada’s home price index hit another record this past August, suggesting that tighter lending rules and rising mortgage rates have yet to quell housing demand. Further evidence comes from the fact that the country’s largest banks have yet to report a slowdown in mortgage activity. In fact, mortgage balances for Canada’s largest banks increased in the third quarter, as home buyers stepped on the property ladder in an effort to lock in low interest rates, fearing they might continue to rise.”
The experts at Canadalend.com understand that when it comes to buying a home, there’s more to consider than just interest rates. The independent agents at Canadalend.com take all of their client’s budgetary and lifestyle situation into consideration before searching all of Canada’s banks and lenders, looking for the financial products best suited to the client’s needs.
Canadalend.com is one of the largest, most trusted private mortgage brokers in Canada, with skilled independent and licensed professionals helping Canadians coast-to-coast. Canadalend.com provides its clients with residential and commercial mortgages, home equity credit, debt consolidation, and financing concerns. To learn more about Canadalend.com, visit the web site at http://www.Canadalend.com.