1. ORIANA FINANCIAL
“GREAT MORTGAGES MADE SIMPLE”
Rate Uncertainty
by www.canadianmortgagetrends.com
Choosing between a fixed or variable mortgage can seem like throwing darts with your eyes
closed.
Borrowers today are seeing headlines like this:
Economists want BoC to keep raising interest rates
Then they turn the page and see this:
Could the Bank of Canada be forced to cut rates again?
Even the Bank of Canada’s Mark Carney isn’t too sure of the future.
On CBC yesterday Carney said, “Upside risks are balanced by downside risks…The upside is as
likely as the downside.”
At a FirstLine Mortgages event yesterday, CIBC economist Benjamin Tal translated that. “What
Carney is telling us,” Tal said, “is (the Bank of Canada) has no clue what is going to happen.”
Tal added:
• “The bond market is pricing in inflation below 1.50% for the next ten years.” (But he
believes “the bond market is mispricing inflation.”)
• The Bank of Canada now predicts the economy won’t reach its full potential until
year-end 2012, one year later than previously expected.
• The BoC doesn’t need to raise rates to slow consumer credit because “it’s already
happening.”
• Consumers’ spending capability is at a “30-year low.” It won’t take many rate hikes
to slow the economy from here.
As a result, Tal asserted: “I don’t expect (variable or fixed) mortgage rates to rise in any
significant way in the next 12 months.” There is “no rush to make a mortgage decision.”
When someone in the audience asked him which mortgage he’d take today (fixed or variable), Tal
replied:
“I’m almost convinced that over the next 2-3 years variable will be better. In the last
two years fixed will be better. But, the gap (between fixed and variable) will not be
significant over five years.”
That said, if he had to choose today, he feels that “mathematically speaking,” variable-rate
mortgages will "probably” outperform fixed rates.
Darlene Hanley, Mortgage Agent M08003191
Oriana Financial Group of Canada Ltd. Broker Lic. #10214
44 Charles St. W #2304, Toronto, ON M4Y 1R7
Phone: (416) 466-0664, Fax: (416) 323-0744, Email: darlene@darlenehanley.com