9 August 2011
Such forecasts are partially caused by the recent S&P downgrade of the U.S. credit rating. Among other significant reasons the economic crisis in Europe and a threat of default in several EU member nations were called. The global economic unstable situation may be too pressuring, so the Central Bank may decide to lower the rates in order to support the economic growth in case of another recession in the United States.
The deal is that Canada is one of the main American trading partners, so the consequences of all U.S. declines will affect us as well and Bank of Canada has to add fuel to Canadian economy by cutting lending rates.
In spite of such great economic uncertainty, economists don’t expect any housing activity drop. Moreover, if the Bank of Canada cuts its key lending rate, then even fixed rate supporters may be attracted by variable mortgages. And it’s despite the recent fixed rate cuts, caused by the volatile bond market.