Rates on a variety of Canadian mortgage products – from home mortgages and second mortgages, to home equity loans and secured lines of credit – appear likely to remain at or near their current low levels well into 2011, as the Bank of Canada appears poised for a break in the rate-raising regimen it undertook earlier this year.
“Investors,” Bloomberg News reports, “have become more convinced the Bank of Canada will stop raising interest rates at next week’s meeting than at any time since it last boosted borrowing costs on September 8.”
Recent reports showing continued limited access to credit for small businesses, unexpected job losses and a decline in new housing starts are “a recipe for maintaining a very pro-growth type of monetary policy,” Aron Gampel, deputy chief economist at Scotia Capital, told Bloombergs. “The Bank of Canada will go on hold, not only in October, but probably through a good part of next year,” he predicted.
The remaining 2010 Bank of Canada policy meetings – where Canada’s central bankers decide on what, if any, changes will be effected to their key overnight lending rate – are scheduled for October 19 and December 7.
While Bank of Canada monetary decisions are closely guarded and there is, of course, no certainty as to whether or not the bank will move its lending rate, it seems financial markets have priced in a halt to further rate increases extending into 2011. Nevertheless, Bank of Canada Governor Mark Carney, has already signaled he’ll apply “caution” in the face of a “more gradual” recovery in Canada and signs the U.S. Federal Reserve may ease policy, Bloombergs notes.
“Taking a wait-and-see approach is a smart thing to do at this time,” Mr. Gampel told Bloombergs in a telephone interview. “Last week, Gampel’s bank changed its forecast for the next central bank rate increase to September 2011 from January,” Bloombergs notes.
A significant pause in further rate hikes will afford home owners and/or purchasers the opportunity to access a full range of home mortgage products (first and second mortgages, home equity loans, home equity lines of credit etc.) at rates that are still well below their historic norms.
