We are certainly in an exciting time when it comes in interest rates and the same question seems to be on everyones mind. Just how low will interest rates get?

We would really need a crystal ball to know the answer for sure (my crystal ball is currently being professionally polished). There are some indicators showing that we may see some slight increases to fixed interest rates in the near future. While the Bank of Canada has committed to keeping the prime rate where it is through to the middle of 2010, fixed rates are typically more affected by other influences. Bond yields have been slowly rising over the past 5 weeks putting upward pressure on fixed mortgage rates, which have remained virtually unchanged over a similar period.

Combine this with the increases to real estate sales we have seen over the past couple of months and you have a formula for mortgage rate increases.

So with rates as low as they are right now, do you take advantage of a variable at 2.85% or do you lock into a fixed? I personally think that even if the variable does drop to prime or prime minus over the next two years (which I think is unlikely), you will still win with a fixed rate in this market, and here's why.

The rates are very low right now, but once we come out of this 'recession' (isn't that what the media is calling it?), you can be assured that rates are going to go up.

As you know, rates are ridiculously low right now. As our economy starts to grow, so will the interest rates. Once our economy improves, the financial institutions will be looking to offset todays low mortgage rates with equally higher rates. In order to protect yourself from this, it makes a lot more sense to go with a fixed rate these days if you are in it for the long haul.

Courtesty of

Paul Meredith CityCan Financial
Direct 416-409-8009 fax 289-878-7969