The Silver Lining

This past Wednesday the Bank of Canada decided to maintain the key lending rate at 1% and announced the need for rate hikes has diminished.  With eyes on the struggling economies of Europe and the United States it is predicted interested rates will remain low until mid-2012.

For many of us, the silver lining to the current economic environment is historical low borrowing rates for mortgages and loans.   While prime rate maintains at 3% which is great for variable rate mortgages, the average 5 year fixed mortgage rate sits at 3.59%.  For those carrying debt, this is a great opportunity to consolidate loans at lower interest rates and use the savings to increase their payments to ultimately pay off their debt sooner. 

The next meeting date for the Bank of Canada to discuss rates again is scheduled for October 26. 

Dawn Desjardins, assistant chief economist with RBC Economics summarizes what this announcement means to the Canadian economy.

“Today’s statement shows that the Bank has clearly stepped away from an imminent tightening in monetary policy and will keep considerable monetary stimulus in place in order to mitigate the downside risks to the outlook emanating from the US and Euro-zone.  Even with a reacceleration in Canadian growth in the second half of the year, today’s statement points to downward revisions to the Bank’s 2011 growth estimate which stood at 2.8% in July.  At the same time, Canada’s headline inflation rate dipped back below 3% in July and the slower pace of growth in the first half of the year is consistent with the output gap narrowing more slowly than was assumed in the July forecast.  With the Bank still forecasting a rebound in growth in the second half of the year, the case for rate cuts at this juncture is wanting.”

For more details on the reasons and implications of the rate decision please read here .

For further details about the lending rates please see the Bank of Canada site here.

If you need help calculating your savings by consolidating your debt, give me a call.

Have a great weekend,

Tracey