SUMMER = when interest rates are going to rise!!!

Hot off of the press – below the Bank of Canada expects mortgage rates to rise in the summer of 2014 !!!

Warren buffet said everyone knows what is going to happen – [rates rising] – but no one knows when. Now we know, or at least we think we know. The article does a good job explaining that when the market rises, bonds have to pay more to get people to buy them and this increases the bond rates. Surprise, higher bond rates = higher mortgage rates.

So … pay off that debt, the line-of-credit, the credit cards, car loans and all the rest now while you can. And, think about locking in your mortgage if you are in a variable, and getting your docs in for a 120 day mortgage rate hold to be triggered when we find out from the banks that rates are going to rise. The 6 month clock is ticking.

Mark Herman

 

Long-term rates may rise soon, Stephen Poloz says

Bank of Canada governor predicts pressure on bond yields as Fed continues tapering

CBC News Posted: Jan 07, 2014 1:22 PM ET Last Updated: Jan 07, 2014 2:34 PM ET

Bank of Canada governor Stephen Poloz says he expects long-term interest rates to rise this summer as the U.S. Federal Reserve continues tapering, but he believes that would be a positive development.

Poloz, who was named Canada’s top central banker in May, said he believes that the U.S. Fed will continue to taper its bond-buying program throughout the year and that will create market pressure on bond yields.

“In the context of a firming global economy, especially the U.S., we’d expect to see some upward pressure in market interest rates, long-term rates in particular, where the quantitative easing has its primary effect,” Poloz said in an interview with Amanda Lang on CBC’s The Lang & O’Leary Exchange to be aired later today.

“So as a tapering occurs we might expect to see as we saw in the summer some increases in long-term rates, most of it seems to be priced in,” Poloz added.

The Fed reduced its buying of U.S. bonds to $75 billion this month, after a decision announced at its December meeting to reduce the stimulus program meant to keep interest rates low and grow the American economy.

The market handled the tapering announcement well, though it put pressure on bond yields, including Canadian bond yields, Poloz said. That would lead to an increase in long-term fixed mortgage rates, though the Bank of Canada would not increase its benchmark rate.

Poloz said he believes a long-term rate rise wouldn’t greatly hurt the Canadian economy as the housing market appears to be  heading for a soft landing and consumer spending, which has kept the economy strong these last few years, must come down to bring down household debt levels.

The Bank of Canada kept its benchmark interest rate at one per cent in December, but there was an uptick in mortgage rates last summer after bond yields rose. …

 

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