Rates to hover for 1 year; till June 2013.

This is good news. But remember, the market is smart and will start to increase bank and lending rates before in anticipation of the Band of Canada’s rate increase.

AND this does NOT mean that fixed rates will not increase. They are set by the prices of the bond market not the government. This only says the government will leave the Prime rate as is, which as been at 3% for about 2 years now.

 The Canadian Press  Jul 3, 2012 – 3:29 PM ET | Last Updated: Jul 3, 2012 3:44 PM ET

TORONTO — The Bank of Montreal predicted Tuesday that the Bank of Canada will keep interests rates lower for longer than it expected.

Economists at the bank now believe the central bank will not raise its key rate until July 2013, six months later than their earlier prediction of January 2013.

Senior economist Michael Gregory said the change stems from the easing policy of the U.S. Federal Reserve, a downgraded Canadian economic outlook and tightened mortgage rules.

The changes, which include a cut to the maximum amortization period for government insured mortgages cut to 25 years from 30, should stem some fears around growing household debt that would otherwise push the Bank of Canada to increase rates sooner.

“The tightening of the government’s mortgage insurance rules does serve to act like higher interest rates specifically for that sector,” Gregory said. “So that takes some of the urgency away from the Bank of Canada to adjust rates any time soon.”

The Bank of Canada has kept its key interest rate at one per cent since September 2010.

The rate affects the prime lending rates at Canada’s major banks and in turn influences all kinds of interest rates including those charged to variable rate mortgages and lines of credit.

Gregory said he expects that the Bank of Canada will change its projections for economic growth when it releases its new monetary policy report on July 18.

“I suspect it will show softer growth in Canada, partly because of global factors and in part because of what’s going on in the U.S,” said Gregory.

http://business.financialpost.com/2012/07/03/bank-of-canada-likely-to-hold-interest-rates-until-july-2013-bmo/