# Interest rate forecasts



## MrMatt (Dec 21, 2011)

I'm wondering what type of interest rate forecasts people have.

I wasn't expecting a rate hike until early next 2013, but now it sounds like they're suggesting hikes a bit earlier.

I was thinking the step to 1.25 & 1.5 might happen a bit earlier than projected in this blog
http://www.troymedia.com/blog/2012/04/06/canadian-interest-rate-forecast-for-april-2012/

I was also wondering if they think the threat of sooner to rise rates might be enough to slow things down.

I'm not quite ready to kick myself for not locking in my variable rate mortgage... yet.


----------



## Daniel A. (Mar 20, 2011)

The Bank Of Canada has no love for low rates, it still is a catch 22 but if things continue on track I'd look for .25% increase by Sept. 
As long as our dollar does not gain to much strength it's possible to see a second .25% by year end.

Banks are already trying to cool things down by increasing there borrowing rates.
Markets tend to be quiet in summer so that may be the better time.


----------



## andrewf (Mar 1, 2010)

I think it depends a lot on how the global situation unfolds. If Europe continues to muddle through, then BoC may raise rates as they hinted. If things begin to break down again or if there is increased uncertainty, they may delay rate hikes again. Same situation we have been in since 2010.


----------



## Cal (Jun 17, 2009)

I think Europe will continue to get by....nothing more, but I do think the US will slowly improve...very slowly, so I do expect some .25 point increases by the end of next year. None of the politicians seem to want to be the bad guy in regards to RE, so Carney will have to stop the household debt levels from increasing further is my guess. 

I am sure all of the savers out there would like to see a few quarter point increases too.


----------



## HaroldCrump (Jun 10, 2009)

Meh...just more growling and rumbling by the paper tigers.
They don't want to raise rates...there will always be some excuse.
US debt, Europe, China, the rings of Neptune, etc.

The exact same thing happened in 2011.

The spring updates were...what's the word...ah, yes - _hawkish_.
Come summer/fall, there were excuses galore for not raising rates.
It's a pretty good bet that fate will oblige the BOC this time as well and something will "come up".

Even if they raise by a pitiful 25 bps or even 50, that will do nothing to cure the consumer and housing markets, or control the inflation.

As far as the govt. is concerned, low interest rates are the goose that lays golden eggs.
Why kill it?


----------



## MrMatt (Dec 21, 2011)

I was also thinking the dollar jumped up a good bit on the suggestion that rates might rise sooner than previously expected. 

Maybe just the threat of sooner rate increases might slow things down a bit, even if they're forecasting far into the future.


----------



## HaroldCrump (Jun 10, 2009)

MrMatt said:


> Maybe just the threat of sooner rate increases might slow things down a bit, even if they're forecasting far into the future.


It is more likely to ignite an apoplectic frenzy of buying.
Wait until you start seeing advertisements from RE agents urging people to buy RIGHT NOW before rates rise.
And the ads from the banks asking people to take out a fixed rate mortgage RIGHT NOW.


----------



## Just a Guy (Mar 27, 2012)

HaroldCrump said:


> It is more likely to ignite an apoplectic frenzy of buying.
> Wait until you start seeing advertisements from RE agents urging people to buy RIGHT NOW before rates rise.
> And the ads from the banks asking people to take out a fixed rate mortgage RIGHT NOW.


I can't see this hurting anyone long term...it may make more money from the banks, but I doubt they'd go much lower. I'm more afraid of some of the other limits banks are trying to impose.


----------



## HaroldCrump (Jun 10, 2009)

Just a Guy said:


> I can't see this hurting anyone long term...


Let alone long term, it is hurting _now_.
The crazy RE bubble is impacting all aspects of personal (and public) finances.


----------



## Daniel A. (Mar 20, 2011)

Interest rates are and always will be a double edged sword.
Any increase will make the dollar more attractive to investors, but a rising dollar hurts exports and jobs.
Natural resources have carried us for the last couple of years.


----------



## HaroldCrump (Jun 10, 2009)

Daniel A. said:


> Any increase will make the dollar more attractive to investors, but a rising dollar hurts exports and jobs.


The kind of exports it hurts is dead money anyway.
The sooner we realize that, and move on, the better it is.

It will make imports cheaper, which will help a lot with middle class affordability (lower gas prices, lower food prices, etc.).
At a time when most countries are engaged in a race to the bottom of competitive currency devaluations, it may not be a bad thing to go in the opposite direction for a change.

There has to be a balance, obviously, but right now there is none whatsoever.


----------



## the-royal-mail (Dec 11, 2009)

All of this insanity is simple to pump RE and nothing more, as Harold explains above. Housing has become a big problem. There are not enough quality apartments to rent in nice neighborhoods and the alternative is to live in a shoebox condo or a $640K single detached house. These are not good choices and this rate nonsense is what is inflating the prices. They've been inflated so much that I'm thinking we'll need a US style crash to correct the rates to what they should be.


----------



## HaroldCrump (Jun 10, 2009)

the-royal-mail said:


> There are not enough quality apartments to rent in nice neighborhoods and the alternative is to live in a shoebox condo or a $640K single detached house. These are not good choices and this rate nonsense is what is inflating the prices.


^ This is wrong. 
Inflation is only 2%
The goverment says so.
It must be true.

:rolleyes2:


----------



## Just a Guy (Mar 27, 2012)

HaroldCrump said:


> Let alone long term, it is hurting _now_.
> The crazy RE bubble is impacting all aspects of personal (and public) finances.


I meant locking in long term wouldn't hurt anyone.


----------



## HaroldCrump (Jun 10, 2009)

Woohooo..."inflation" came in below target.
If you were waiting for BoC to raise rates anytime soon, try again next year.

In the meantime, go ahead and buy a $640K mortgage.
And while you are there, might as well invest in a couple of condos too.


----------



## Toronto.gal (Jan 8, 2010)

HaroldCrump said:


> In the meantime, go ahead and buy a $640K mortgage.
> And why you are there, might as well invest in a couple of condos as well.


I like your sense of realistic humour. :biggrin:

I can recommend condos for those interested in the $700K mortgage and up! :rolleyes2:


----------



## thesheet (Apr 20, 2012)

*interest rates can bump down here for a while*

But, considering the longevity of our loans, ie. 25 year mortgages, the chances are pretty high that you will see much higher financing costs at some point of the mortgage.

If the money printing to finance the US deficit continues, I forsee the return of extremely high interest rates.

It could be as long as ten years or more; but if spending continues due to the perceived safety of low interest rates and money printing, the eventual bond market collapse will be talked about for centuries. One cannot predict outcomes of these things but Carney is right. The time to get your house in order is now.

If this collapse doesn't happen, then, well, you've paid off your debt!

thesheet


----------



## Lucy (Mar 10, 2012)

they do no need to raise rates to cool real estate. they just need to tighten the mortgage rules. the government has a huge mortgage too and should they rase rates, they will have a hard time with their payments too.


----------



## HaroldCrump (Jun 10, 2009)

Yes, absolutely, there are many ways they can tighten the housing market.
They can also temporarily suspend the HBP program, for instance.
Trouble is, they are not doing any of them.


----------



## Cal (Jun 17, 2009)

Of course not, that could hurt their chances for re-election. Who wants to look like the bad guy in front of voters.

Thats why it will fall on Carney to raise rates.....which I agree isn't my first choice of how to cool/control the housing markets either.


----------

