Historic Events Contributing to Declining Mortgage Interest Rates
Below is a recap of the historic economic events for this month, some of wich are directly responsible for the drastic decline in mortgage interest rates:
Industry News
The Bank of Canada chopped its key interest rate by another half percentage point to its lowest level ever yesterday, and warned that the Canadian economy will contract by 1.2% this year.
The central bank’s target for the overnight lending rate now stands at 1% – lower than in 1958, when the most-watched policy rate was 1.12%.
“The outlook for the global economy has deteriorated since the bank’s December interest rate announcement, with the intensifying financial crisis spilling over into real economic activity,” the bank said in a statement. – Globe and Mail
“While the economy is likely to look a lot worse in 2009 than it did in 2008, the dramatic decline staged by the stock market last year is unlikely to be repeated this year,” says Scotia Economics. And despite the 50 basis points drop in prime yesterday – bringing it to 3% – Scotia Economics has already reiterated its stance that the Bank will be forced to cut another 50 basis points in March.
Consumers pinched by the credit crunch are getting some relief as lenders lower their rates on both fixed and variable mortgages.
Their quick move to follow the Bank of Canada yesterday could be a sign of pressure from the government and customers, and also that borrowing costs may be easing a bit. – Globe and Mail
The Canadian economy should emerge from recession during the second half of the year as stimulus measures take effect, setting the stage for interest rate hikes in a year, a Reuters poll showed.
A new poll suggests most Canadians want the government to avoid major tax and spending initiatives, and instead focus on keeping inflation and interest rates low.
The federal government has pumped $350 million into the Business Development Bank of Canada (BDC) to allow the bank to offer $1.5 billion in new financing to help small- and medium-sized business, Industry Minister Tony Clement said Monday.