11 October 2010

Practically, it means that the fixed rates are very attractive and may go even lower.  
Forecasts:
•    The majority of analysts do not expect an October 19 rate hike by the Bank of Canada.
•    Moreover, discounted fixed rates may fall even lower in the next week (probably by 5-10 bps – 0.05-0.10%).
•    This news will hardly influence variable mortgages.
•    Time will show how the big banks will react. It’s obvious that the Big 5 are operating on a large 352 bps (3.52%) spread, but they’ve been reluctant to act since August cut to 5.39%.
Interest Rates:
•    “It seems the market had priced the Bank of Canada out of rate hikes. This situation is not going to change”, – Doug Porter, BMO economist.
•    “The employment report just supports the market’s view that the Bank of Canada will take a pause on October 19”, – Sebastien Lavoie, LBC economist.
•    The economic growth is expected to return to 2% by mid-2011. It will certainly “give the BoC some reason for raising rates, but we still don’t see rates going up quickly”, – CIBC economists.
P.S. RBC was the first who dropped their 5yrs posted rate by 10bps to 5.29%