Warren Jestin, Chief Economist of Scotiabank, feels that we are not in for a double dip recession. Fueled by slow & gradual growth, he predicts that long term rates will rise before the Bank of Canada begins the increase of the Central Bank prime in June 2010, particularly in the 3 and 5 year terms. The increases in rates for 2010 will be followed by a plateau in 2011. He also threw a caution to those homeowners with variable rate mortgages…

View entire article from Vancouver Sun/Financial Post.

If you are a consumer carrying debt on a variable rate basis, the next few months may be a time to keep a close eye on just how much substance our economic recovery has. To lock in or keep floating? We have been at historic all time lows for fixed rates, and the prime has only one direction it can go, and that is up.

If you are on a fixed budget and can not tolerate increases in your payments, the next few months may be the right time to convert & ”lock-in” your rates. Remember that when locking in, the fixed terms have different pre-payment penalties than variable rate mortgages for early pay off (even upon sale of the property). Check with your bank to confirm their policy; there is an industry standard which is the greater of 3 months’ interest or the interest rate differential (IRD), however different banks calculate the IRD in different ways and it is important you understand what you are “locking in” to.

Comment (25)

There is so much I could say with respect to the attached article, but I will let viewers read for themselves…In my humble opinion, Mr. Flaherty’s rejection of the G8 recommendation reeks of arrogance in the fallout of the global crisis that the world is trying so desperately to recover from…once again, we need to ask ourselves; what have we learned from the last 18 months, and are we doing all we can to ensure history does not repeat itself?

View full article from the Globe&Mail.

Comment (26)

If the global economy has been on a heart monitor for the last 12 months, we are now starting to see a faint pulse on the screen…the questions are how strong will this pulse get, and will it be sustained? These are 2 critical questions when considering the future of interest rates.

The growth numbers are below what was predicted by the central bank, but still provide a hint of optimism;  3rd quarter annualized GDP growth reported to be 0.40% vs. the 2.00% expected. However, recent data on retail sales and a strong jobs report for November provide some welcome Christmas cheer.

In real terms, there are ”significant fragilties” that remain which lend support to the central bank’s policy to keep the bank rate at 0.25% until June 2010.

There are mixed reports as to what will happen after this date. Some economists are taking the view that the global economy will be so much better that we will see the bank rate increase by at least a full 1 percent by the end of 2010.

I just can’t help but wonder though…with the money that has been printed, the debt incurred, and the unforeseen factors that occur in other countries; when are these going to be factored in to the economic recovery equation? Are the powers-that-be forging ahead on the basis that it is business-as-usual? That there are no consequences or ramifications to what the world has just experienced? I believe that we are heading through unchartered economic waters, and as such, all our travels should be with eyes wide open and exercised with caution.

Life, economic and otherwise, is precious.

View full articles at CBC News, Globe&Mail, and Financial Post.

Comment (24)

The Central Bank  of Canada has kept the prime rate at 0.25%; maintaining the conditional commitment to hold the prime rate steady until June 2010.

Canada and the US appear to be cautiously optomistic on the global economic recovery, but are not giving the green light that we are “out of the woods” just yet. Canada’s economy grew a modest 0.1% in the 2009 third Quarter, and the US economy by 2.8% in the third Quarter. Federal Reserve Chairman, Ben Bernanke, warned that the US is still encountering “formidable headwinds” via a weak job market, cautious consumers & still tight credit.

The next rate setting meeting in the US is December 15th and 16th. Canada’s next meeting is January 19th, 2010.

View entire articles from CBC News, and CBC News.

Comment (36)

No surprises this morning that the European Central Bank has left their prime rate unchanged at 1.00%. More details to follow as to how the Bank will slowly ween the financial stimulus out of the economy.

View full article from Financial Post

Comment (41)