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Interest Rate Update

Interest-Rates Inflation will accelerate to 3% in the next few months according to Laurentian Bank’s Carlos Leitao.  That’s well above the Bank of Canada’s 2% target.  If Leitao is right, mortgage rates could very well continue their ascent.

CIBC, for example, predicts “100 basis points of hikes coming in 2009 as Canada’s inflation problem heats up.”

On the other hand, Bloomberg’s economist survey suggests rates will remain the same until at least December…for what that’s worth (their last survey wasn’t too accurate).

Talk of rate hikes has many Canadians shying away from variable-rate mortgages lately.  Invis’s Mark Olkowski, however, isn’t convinced fixed rates are now the way to go.  Olkowski says, “Right now, if it was me that had the variable, I’d be sticking with it because I’d look and say that even with that increase that’s expected to happen, (you’d save) money over that net period of time.”

Of course, there’s a multitude of factors to consider so talk to a mortgage planner for specific advice.  Ask them to show you the worst case scenario of a variable-rate mortgage.  If you can handle the worst case then a variable is worth a look.

Sources:  CMT, Bloomberg, Canadian Press