This was written in November 2010, when rates were historically low.
Rates up 300% Since May
As predicted by most Financial Pundits, the Bank of Canada key overnight rate jumped another 33% from its previous rate and is now an astronomical 300% higher than what it was in May!
How can this be possible? Well, the rate went up 0.25% to 1.00% (from 0.75%) and remember in May, it was at 0.25%, but it is much more sensational to use the increased numbers.
Many folks in the know claim this may be the last increase until after Q1 2011 unless something drastic happens in the economy (like, say an inflationary Tax is implemented (can you spell HST)). The Bank of Canada’s CPI Target of around 2.0% is still above the current rate (1.6% using their basket of goods), so in the Bank’s estimation, inflation is still under control, so that is another reason that rates may not be going up much soon. Given how fragile the U.S. economy is proving, we may not see any more increases for the next little while, but remember, these low rates are still historically low, and now is the time to take advantage of them.
What do I mean by taking advantage of low rates? If you are in a variable rate debt class situation (like a line of credit or variable rate mortgage), now is the time to pay off your debt while the interest charges are low, and you get more bang for your buck, and you can pay more of your principle off. Did you think I was saying go out and buy things on credit? You don’t read this blog much, do you?
Those are still incredibly low interest rates. Even if they have gone up 300%.
Hello
Why do we have to pay the BOC rate PLUS the bank’s prime. This only adds to the cost of borrowing money. Why can we not deal directly with the BOC? Banks rip us off.
I agree, this is no time to panic and “lock-in” your mortgage rate (even though the 5 year is coming down). This should be the last of the consecutive rate hikes and we are still at historic lows. Take advantage, as you said, and pay down that mortgage & LOC.