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Typically one of the most
asked questions - what are interest rates going to do? At this
point in a conversation, I will say "let me get my crystal
ball out". The best answer to that can be narrowed down to
accuracy, not precision. For anyone who lived through the
early eighties and experienced the "bubble" that burst, you
know how volatile the market can be.
When looking at market
trends a few factors are taken into consideration. Things
like, the National Debt and bond rates, commodities, supply
and demand, and world events are first to pop into my head.
Take for example world events. What did your mutual funds do
when the trade towers came down? It's safe to assume that most
mutual funds came down with them. Oddly enough, mortgage
interest rates were affected only slightly after this
disaster. As long as unforeseen and unfortunate world events
happen, there is no way to guarantee a precise answer to what
mortgage rates are going to do. Terrorist attacks,
assassinations, etc. have effects on what our purchasing power
is in the housing market.
The National Debt - o.k.,
this is not permission to go take a nap! Yes, there are many
factors to consider when looking at the National Debt and how
they derive their findings. We are not going to get into that.
Let's just say that we look at the "results" instead of "how"
they get there. (otherwise you would go and take that nap!)
The accuracy in interest rate prediction can only be judged
after all of the world's political and economic events have
worked their way through the bond market over a period of
time.
Focusing on the population
and local or regional expansion, we will take Alberta as a
great example. When employment and economic conditions favour
a particular area (and we are talking about the great province
of Alberta!) demand for housing hits high gear. Where there is
work, there are people! Combined with the strength of the
dollar, housing demands are up, and inventory (supply) is
behind.
What does this have to do
with where the interest rates are going? When the Canada
Mortgage and Housing Corporation (CMHC) want to slow the
market down, they can influence the market by raising the
interest rates. Think of CMHC as a "heating and cooling
system" reacting to the pace of Canadian housing and the
temperature of the economy.
So as you can see it is not
one, but MANY factors that determine where our interest rates
are going. The only thing we can be sure of when discussing
interest rates is that hindsight is always 20/20. What's
around the corner? Well, let me get my crystal ball...
Please
contact me if you have any further interest rate
questions.
Sincerely,
DAN MASS, Mortgage
Agent
700-4th Avenue
SW
Calgary, Alberta, Canada
direct:
403.294.0033 cell:
403.710.1505 fax:
1-866-902-4910
email: dan@canadafirstmortgage.com | 
