Variable Rates going down in 2006

Posted September 2006

Your Mortgage Rate Update

Rates are going down!

Canada's inflation rate, nearly 2% lower than in the United States, will allow the Bank of Canada to steer a lower course on interest rates.

Much of the credit for our lower inflation can be attributed to the stronger Canadian Dollar. In the U.S., it's believed that the feds may have slightly overshot rate hikes, and will reverse course in 2007, lowering their target rate to 4.75% from its current level of 5.25%.

With core inflation much lower in Canada, the Bank of Canada may have to lower rates even more in the future due to the strong Canadian Dollar weighing heavily on non-resource exporters.

The prediction? Lender prime rates will fall from their current level of 6.00% to 5.25% by June 2007 and are predicted to stay low for the remainder of the year.

For fixed mortgage rates, the bond market is predicted to perform well over the next 12 to 15 months, with the 10-year benchmark government bond yield moving from its current level of 4.32%, down to 3.95% by June 2007.

So we'll likely see lowering fixed rates, as well. Lower rates across the board should continue to support a strong real estate and housing market for Canadian home owners.

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