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Is The Interest Rate Drop Something That You Should Worry About?

Posted by Sherry Rioux on January 22, 2008

No.  At least not right now. In fact, if you are in the real estate market as a Buyer or a Seller, you might be feeling rather positive today.

It’s been an interesting morning with the interest rate cuts.  The U.S. Federal Reserve made a SURPRISE cut of 75 basis points and apparently, failed to let the Canadians in on what they were doing.  The Bank of Canada announced a cut today of just 25 basis points thereby causing a fairly large gap between our two countries.  In the past, gaps like this have typically led to a rise in the value of the loonie which is something Canadian exporters must be worrying about at this moment.

According to a newsletter I received just now from an Invis Mortgage Consultant, this reduction means that, lenders will be under competitive pressure to decrease rates for variable-rate mortgages and lines of credit based on the prime rate. They go on to say that, “Fixed-rate mortgages are not likely to be affected directly by today’s announcement as their rates are influenced primarily by movements in the bond market and not the Bank of Canada’s overnight rate.”

While economic jitters are certainly out there, we need to keep things in perspective.  The Canadian economy is still in overdrive and continues to show growth every quarter.  Employment is still at record high levels and inflation is being maintained at stable levels.  While we may see some cooling this quarter as a result of the U.S. economic impact on our Canadian economy, there is not need for the type of doom and gloom our media is so apt to promote.

Keep an eye on rates.  I suspect another drop is not too far away.

2 thoughts on “Is The Interest Rate Drop Something That You Should Worry About?

  • on January 25, 2008

    Hi Marg, Appreciate you keeping your readers abreast of interest rate cuts, you may wish to reference a TD press release I received today that anticipates a 50 basis point rate cut march 4 and a further 25 basis point cut in April. (See post today on my blog Look forward to keeping in touch with Collingwood real estate happenings on your fine blog.

  • Marg
    on January 25, 2008

    Thanks for that heads up for my readers Hilary and I enjoyed your blog about Oakville this week. It’s my old home town so it alwys amazes me to learn of all the changes.

    Just a reminder to folks who are getting pre-approved; when rates drop, your lender will also drop your pre-approved rate.

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