# Your thoughts on future variable rate increases



## Liz (May 31, 2009)

Hi all,

I'm curious about peoples' thoughts regarding future variable rates, given yesterday's BoC increase. 

I read a blog entry here where the author writes:



> As of yesterday, Big 5 bank economists were suggesting (on average) that prime rate will rise from today’s 2.25% to roughly 3.25% by year end.* By the end of 2011, their forecasts imply a 5% prime rate. But those estimates will change as weeks progress, as they always do.


What do people think? Do you expect variable rates to rise from 1.75% (yesterday; 2% today) to 4.5% (prime -.5) in 18 months? And do you think it stop there, or continue upwards?


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## canadianbanks (Jun 5, 2009)

Yes, I fully expect the rates to rise this much and possibly more. I think many people will be surprised by the speed the rates go back up.


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## Berubeland (Sep 6, 2009)

I don't expect rates to rise that much in Canada

First of all even though we escaped most of the real estate carnage that is still going on in the States our fundamental numbers do not really support the increases in the overly hot real estate market. 

Our economy is not doing too bad but it's not that great either. Except for the real estate market and steps have been taken to give that a cool off. 

Then if you look at the world wide situation it's pretty grim. Most governments are actively working to keep interest rates as low as possible to help their economies. Canada does not exist as a separate entity from the rest of the world, we exist in a global environment. So considering the weakness in the global economy and the steps being taken to rectify this situation, I don't see how the Bank of Canada could drastically increase interest rates. 

There are lots of mortgages and credit cards and debt in general that is absolutely unsustainable at significantly higher interest rates. This will affect a large percentage of the population and our politicians want to be reelected. 

So I do not see a significant sustained increase in interest rates over the next 18 months. Nope...I don't


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## Addy (Mar 12, 2010)

I'm not sure if they will rise that quickly, but if they do I will be doing the happy dance.


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## bean438 (Jul 18, 2009)

Berubeland said:


> I don't expect rates to rise that much in Canada
> 
> First of all even though we escaped most of the real estate carnage that is still going on in the States our fundamental numbers do not really support the increases in the overly hot real estate market.
> 
> ...



HIgher interest rates when everyone else is low would also mean a much higher CDN dollar too. Bad news for Canada.

Reality is I couldn't care less about rates. I didn't over extend myself so I have a nice cushion.


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## Addy (Mar 12, 2010)

bean438 said:


> HIgher interest rates when everyone else is low would also mean a much higher CDN dollar too. Bad news for Canada.
> 
> Reality is I couldn't care less about rates. I didn't over extend myself so I have a nice cushion.


Agree 100%. I was being selfish as we have a bit of cash saved up so if rates go up, we earn more in interest. And my husband has a pretty much guaranteed job (military). However, there may be direct implications I'm unaware of, so my selfish hopes may end up biting me in the derriere!


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## GeniusBoy27 (Jun 11, 2010)

I think interest rates will go up, but not so quickly as being projected.

I've heard the economists in private, say that they don't expect the rates to climb too fast, but I would suspect that they will go back to a historical average.

Which is somewhere around a 4-5% prime.

The caveat is that the US economy and European economies are stagnating, and that could have an effect on commodity prices. So I think 1.25-1.5% prime (which means 3.25%-3.5% bank prime) is reasonable. Also, I think as the rates go up, the variable capacity should be better ... namely around prime-0.75% to prime-0.9%, should be achievable.


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