Interest Rates set to Rise or Fall?

Posted on May 6, 2008 at 10:36 am
Filed Under Financial Markets, Financial Planning, Mortgage Planning

Are interest rates on the rise in Canada, or are they set to continue to decline based on the US economy?

That seems to be a fair question, especially considering the shaky economy in the US and the question mark that looms over our Canadian Economy. To make matters worse, TD released a report yesterday saying that they “expect another 100 basis points in rate cuts out of the Bank of Canada to help fend off any fallout north of the border”. Ironically, on the very same day, CIBC World Markets released a report stating “Higher prices for food and energy will reverse the direction of interest rates in the next 12 months, and lift energy and materials stocks to new record highs”.

Your Take-Away: With drastic contradiction like these two reports create, it is very difficult to know just what is happening and more importantly, what to expect. If I were to be forced to make a decision of whether to choose a variable or fixed rate mortgage in this economy, I would make the same one as though the economy was strong and fruitful. Don’t let yourself get caught up in the hype and try to time the market, and definitely don’t step too far outside of your comfort zone and make a decision you would not normally make because of one report or the other.

At the end of the day, do your research and do what you are most comfortable with for yourself and your family. It is impossible to know what the future holds, which is why sticking to your guns and your core values (otherwise known as gut instinct) is key in this environment.

Good luck with your decision making, and until next time, have a Terrific Tuesday.

Chris & Elisseos

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