Nov. 17, 2009

The Forecast for Canadian Interest Rates Looks Good


The current level of interest rates is to remain at 0.25% after the last rate disclosure in October by the Bank of Canada. Many experts concur with the Bank of Canada's announcement.

The figure has been kept at record lows for half a year now and the Bank wants to keep it static at least till June 2010. As any real estate agent would tell you, one of the main factors in the property market improvement and continued prosperity in that area are these low interest rates.

Unfortunately there is always a few that clamour for interest rate hikes. Due to large economic growth in certain areas many individuals are being very cautious. Quite a few feel the best way to stop the bubble before it bursts is to increase interest rates. Taking this into account, even with higher prices in the real estate market and faster turnover, the experts still agree that the Bank of Canada has made the proper decision.

The most substantial reason is the confirmed growth of the GDP, which doesn’t seem to be following the BoC forecast of a 2% rise in the third quarter of 2009 (August growth was -0.1%). One of the other aspects concern the domestic industry which is still noticing very high levels of trade deficit and therefore a slower return to normal.

Also, financial pointers don’t demonstrate any signs of growing leverage (the risky use of debt to raise return on investments). Inflation is close to -1%, leaving all fears behind for the present. The other consideration, is all this is the real estate market, which doesn't seemed to have crashed as predicted. Real Estate prices are increasing nicely with a good supply on offer on realtors books. With the real estate downturn last winter there was an excess of properties which are now selling, as the demand is bigger so the prices rise.

Although there are never any guarantees it is fairly positive that the BoC will fulfil its pledge to keep the interest rates low for a good few months yet. At least now the home buyer can feel confident in purchasing their new property.
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