The Globe and Mail reported on May 05/2008:
"Inflation worries will drive interest rates higher: Rubin"
While the Bank of Canada may cut interest rates one more time, unrelenting pressure on food and energy prices will boost inflation over the next 12 months and force rates at least 100 basis points higher next year, CIBC World Markets chief strategist and economist Jeff Rubin said. Read more...
MSNBC in today's report "Surge in energy prices stokes inflation" highlighted the danger of rising energy and food prices could spell trouble for consumers who are overly leveraged and financially stretched if interest rates spike up.
For home buyers considering whether to have a fixed or variable rate mortgage, current variable terms are more favorable than fixed rate mortgage. But, for home owners who are on variable term mortgage and planning to lock-in later, their mortgage plan may preclude them from getting the most favorable fixed term discounted rates.
Variable or Fixed Rate?
Home owners who are on variable mortgage may enjoy another few quarters of low rates before the crentral bank will tighten liquidity and raise rate interest rates. Most Candaian banks do not gaurantee the best discounted mortgage rates when borrowers are locking-in on their rates.
There are disadvantages for home owners who do not plan to stick with their variable mortgage for the full term of their mortgages. Most variable contracts are on 5-year term, which required borrowers to lock-in on a mortgage term not less than 5 years (from the time when the mortgage was issued). Longer term mortgages traditionally being higher than 1 and 2-year mortgages, will result in home buyers locking in at higher fixed rates.
here we go again?