Homeowners considering financing renovation projects through a home equity loan – or, indeed, other mortgage products – may wish to secure financing before September 8th, when analysts expect the Bank of Canada is likely to raise its key lending rate to banks. Of course, non-bank lenders may not necessarily raise rates in lock step if the central bank does raise its market-setting overnight lending rate. Nonetheless, consulting a well-resourced mortgage broker with a wide network of bank and non-bank lenders before September 8th could pay off in better terms for a home equity loan if you are planning major home improvements
Citing a recently released and much publicized report by Avery Shenfeld of CIBC World Markets, the Globe and Mail’s Dave Bergman (in a video story available here) reports that economists are revising their interest rate expectations for Canada. Citing lower than expectation growth internationally – particularly in the U.S. where the Federal Reserve is keeping its interest rates at near zero per cent – Mr. Bergman describes a revised scenario with the Bank of Canada foregoing further rate hikes after September 8th in order to stay in line with U.S. rates.
“Canada’s economy is still tied by an umbilical cord to that of its southern neighbour,” Mr. Shenfield writes in his most recent economic report. Whereas earlier in the summer, he had predicted consecutive rate hikes through the end of 2010, with the U.S. economy struggling and the Fed resisting any rate hike that would further dampen a sputtering recovery, he now forecasts no further near-term rate hikes beyond the 0.25% hike expected in September. History, he observes, has shown that it has been “unwise” when the Bank of Canada’s interest rate has risen more than 2.0% above that of the Fed.
So what does this all mean? If these widely held views prove correct, in the medium-term (i.e., after September 8th) it looks like interest rates will remain near their current low levels. However, in the near-term, those contemplating taking out a home equity loan – or other mortgage product – may wish to act before September 8th in order to save money in the long-term
