Are Long-Term Interest Rates on the Rise in 2014?

Are Long-Term Interest Rates on the Rise in 2014?

Predicting mortgage rates is a lot like keeping your finger on the shaky pulse of what’s culturally cool; it seemingly changes on a day-to-day basis. You really have to stay on your toes. You can trust the professionals at River City Financial to keep up to date on the nation’s mortgage rates. If you read any of our end of the year posts, you’d know that Canada, for the most part, had an ok 2013, with comfortable mortgage rates across the board. We may see that change in the New Year, especially when it comes to long-term rates, as they are expected to rise.

Canadian bond yieldsIn the article, “Long-term rates may rise soon, Stephen Poloz says,” CBC News reports, “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.” Now one would assume that higher long-term interest rates would be a bad thing for the prospective homeowner, but Poloz sees higher interest rates as being beneficial to the overall economy. Why is this?

Last month, the U.S. Federal Reserve decided to condense its stimulus program, which was put in place to help the American economy grow. What this did was put more force on Canadian bond yields. This, in Poloz’s eyes, will naturally increase long-term fixed mortgage rates. By making such a decision, the FED hopes to ultimately strengthen the U.S. economy, which, in turn, will benefit the Canadian economy. As Poloz puts it, “If the U.S. economy strengthens as we believe, those are very welcome market pressures.”

That is certainly an optimistic outlook, one sorely needed in today’s market. You have to keep in mind that the economy and market is a seesaw of sorts; it’s unhealthy to have an imbalance. The housing market has certainly been the superstar of the Canadian economy, but household debt levels have been getting a bit out of hand. In the long run, a hike in long-term interest rates may help in decrease household debt levels, thus creating a balance.

Regardless of what will happen, one thing is certain: interest rates will change . Thankfully, you can depend on River City Financial to keep you in the loop! Contact us today if you have any questions or concerns.



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