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Mortgage rates coming down? May be...

Global economy performed strongly in 2006 despite slow growth in Canada and the United States of America. Strong performance by European Chinese and Indian economies pushed the global GDP growth higher and fear of inflation remains strong. Central banks are willing to increase interest rates to control inflation.

US economy started to slow in mid 2006. Housing market began a downward trend and it continues today. US housing market is not expected to decline too much and it may recover a little bit in 2007. Economy will grow at slower rate than capacity for the first half of 2007. In last half of 2007 and and in 2008 the economy should grow at higher rate as housing and other market stabilize.

Canadian economy also slowed down in mid 2006.Tight labour market and rising wages are expected to have some influence on the growth rate of Canadian economy. Canadian economy will rebound as US economy begins to grow faster in mid 2007. Rising Canadian dollar helped keep the inflation under control. This trend may change once Canadian currency adjusts lower.

Bank of Canada is not likely to change interest rates this year. Canadian economy is growing at good rate is Bank Of Canada is focused on keeping inflation under control. Bank of Canada may reduce the interest rate by .25% this summer. Don't expect a bigger cut in interest rates. Inflation plays the key role.

If you have a variable rate mortgage, you made a really good decision. Interest rates are not expected to increase for next 18 months. Talk to your mortgage broker about advantages and disadvantages of a variable rate mortgage.

Comments

Anonymous said…
I have a variable rate mortgage at .80% below prime rate. I think on average I have done better than having a fixed rate mortgage product. If interest rates go up by 1% or more like it did in 2006, then I'll loose money compared to a fixed rate product. But then again, your fixed rate is only fixed for 5 years in Canada.

_ME

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