So far The Bank of Canada has resisted cutting rates despite mounting pressure from politicians and the general public. We all are trying to tell the outgoing governor David Dodge that both the rapid increase of the Canadian Dollar and the slowing US economy warrant a drop of .25% in the Prime Lending Rate.
From a practical perspective those of my readers who are considering a new mortgage should strongly look at a variable rate mortgage in the short run. Why?
First I think it is a given that the Bank will not raise the Prime rate in the short run, or the long run for that matter. Second, it is highly unlikely that bond yields will rise in this short run either which means fixed rates will likely not rise which means there is no panic to lock in yet.
In fact there is a better chance that variable rates, and fixed rates could drop in this next short while, by the Bank cutting rates in December or early 2008, and the easing of the five year fixed mortgage rate spreads.
Greg Williamson
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