As European debt concerns continue to hang around, Greece is seemingly meeting new hurdles at every turn as they try to get more debt relief.   Like the boy that cried wolf, nobody really believes that Greece will be able to keep the austerity promises since their record on fiscal responsibility has been dubious at best.  Italy and Spain saw slightly increased bond yields, although not yet in the extreme danger zone, as the markets are once again showing concern that the debt crisis will spread further.

The increasing tensions about Iran is causing oil prices to increase as markets worry about potential supply shocks.  Although Iran produces around 5% of the world’s oil, the greater concern may lie in the chance of any conflicts spreading throughout the Middle East and disrupting supply channels.    Higher oil prices will cause a barrier to economic recovery as it represents a major cost for most industries.    Although this would initially keep interest rates low, any prolonged increase in oil prices would eventually result in higher inflation as the increased cost makes it way to the consumers of the end products.  Increasing inflation would lead to higher interest rates as the Bank of Canada would try to keep inflation in check by tightening the availability of cheap money. This situation with Iran is worth watching for the foreseeable future.

Some lenders began raising rates last week.  Most of the remaining lenders are increasing rates slightly this week.  Fixed rates are still extremely low and the current environment represents an excellent time to lock in borrowing costs for the long term.   

Since Monday is President’s Day for the US, please remember that for qualified US clients, financing is available at up to 80% (for the first $750k) at excellent rates.    The last few days have seen an increased volatility in the value of the Canadian dollar.  These movements in the dollar will provide opportunities for non-residents to purchase Canadian dollars at good value if the currency rates are watched closely.

Variable rates are still available at around Prime less 0.20% but for most clients, fixed rates are a much better choice since the spread between fixed and variable is so small.

 Jason McLean BSc, AMP
jason@garibaldimortgage.com