The Bank of England and the European Central Bank also kept their rates as is this week.  The last few weeks of somewhat positive economic news has given the central banks a little more confidence that the possibility of a European meltdown is now less likely.

Today, the Bank of Canada announced that it would leave rates as is for the 12^th consecutive meeting.   This is the longest that the Prime rate has remained unchanged in recent memory.    However, the Bank of Canada indicated that stronger economic performance and increasing inflation may require the Prime rate to be increased sooner than previously expected.  Some economists have even stated that increases to the Prime rate may start as early as the end of this year.  Although these predictions seem sound as of today, there are a number of potential storm clouds on the horizon.    If tensions in the Middle East cause further spikes in oil prices, this would dampen the economic recovery and possibly delay the inevitable rate hikes.  The European debt situation appears to be slowly improving but any significant setbacks would also negatively affect future growth and possibly delay the inevitable rate hikes.

The increased potential for rate hikes was also responsible for the Canadian dollar increasing to almost $1.01 today.  If things continue on this slow, positive growth path, the Canadian dollar should continue to rise against the US currency as Canada is farther ahead in the rate cycle than the US. 

Some of the major lenders are announcing rate specials this week.  Although some sound great, please be aware of the fine print as there are a number of restrictions with most of them.  However, fixed rates remain very low with 5 year terms at 3.19%, and sometimes even lower, as well as 10 year terms at 3.99%.

Jason McLean  BSc, AMP
jason@garibaldimortgage.com