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No Guarantee With Bank of Canada Guarantees

October 15, 2009 by Gordon McCallum

Remember back in April when the Bank of Canada dropped it’s overnight rate to .25% and guaranteed they wouldn’t raise rates until June of 2010? Remember? They said “Scout’s Honour!”

The search engines remember. Here’s our post from April

Since we all have short memories and things change, I guess a guarantee isn’t worth what it used to be. The best way to describe something like this is “It won’t change…until it changes!”

Check out the latest from the Financial Post (ok it’s two weeks old…sue me) with an article on how John Carney backtracks a bit on his interest rate guarantee

Have a great weekend! Get your applications in if you want to get a rate hold.

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Some comments...

  • What are the rates likely to return to when the prime rate jumps back up? Historically mortgage rates have increaed substantially after low interest rates to battle the inflation and sudden rapid rise in real estate values. In Calgary we were not too far off of 20%. Should we be expecting something similiar again?

    Calgary Real Estate Agent (October 22, 2009)

  • It’s pretty hard to predict but my personal estimation is that rates will stay in the single digits. The major difference between today and the early 80’s is Bank of Canada policy to maintain a target rate of inflation of 2%. Back then there was no management in place of interest rates in order to manipulate inflation, so rates took off.

    It’s more likely for us to see rates on a five-year fixed, for a short period, hit as much as 7–7.5% before coming back down to a mid-5% average.

    That’s a guess of course, but hopefully an educated one.

    Gord McCallum (October 23, 2009)

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