September 27, 2006
There is a lot of discussion on the US housing market and what impact the decreasing Real Estate sector in the US will have on the overall economy and consumer spending in the US. The forecast for Real GDP growth is only 1.0% for the US in Q2 2007 versus an actual 2.9% growth rate for Q2 in 2006.
This may seem dismal, but fortunately for the US economy, labour income is back on the rise and should offset some of the fallout from loss of home equity purchasing power. Since wage growth is typically the way Americans financed consumption in the past, consumption being driven the old fashioned way will assist the US economy in coming months.
Also, the Fed Funds rate is at its highest level in 5 years, so there's plenty of room to lower rates to help boost the economy.
There's a prediction of a 50 bp decrease in the Fed Funds rate over the next 9 months.
The Canadian housing sector, in general, has not experienced the same run up in prices, so the threat is far less here. The issue here is the Canadian Dollar, perhaps even hitting 92 cents this year, causing the Ontario economy to falter below 2% growth rate. The Bank of Canada will not want to see a higher CDN Dollar. The prediction is for three 25 bp reductions in prime over the next 9 months or so.
This will help keep the energy driven CDN Dollar from further damaging the Canadian economy.
Bond Yields are also predicted to fall by over 50 bps in the next 9 months. The markets will likely not worry about another hike in rates and potentially see some rate reductions.
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True North Mortgage
September 05, 2006
Your Mortgage Update
Rates are going down!Canada's lower inflation rate, nearly 2% lower than the United States' economy is generating, will allow the Bank of Canada to steer a lower course on interest rates. Much of the credit to the lower inflation rate can be attributed to the stronger loonie.Prediction is that the Fed in the US has slightly overshot rate hikes and will reverse course in 2007, lowering the rate to 4.75% from its current level of 5.25%.With core inflation much lower in Canada, the Bank of Canada may have to lower rates further here due to the strong Canadian Dollar weighing heavily on non-resource exporters. The prediction is for Prime to fall from its current level of 6.00% to 5.25% by June 2007.The bond market is predicted to perform well over the next 12 to 15 months with the 10 year benchmark Gov't bond yield moving from its current level of 4.32%, down to 3.95% in June 2007 and 4.00% in Dec 2007. So basically low and even lower interest rates for fixed rate mortgages as well as variable rate mortgages are predicted for the remainder of 2006 and for all of 2007 which will continue to support a strong real estate and housing market in Canada.If you think a closed varibale rate mortgage is right for you, don't look any further than our prime minus 0.95% mortgage.No Fees, Great Rates!Sincerely, --The Team at True North Mortgage 1-877-248-6677