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Examining Home Mortgage Refinancing Options a Summer Priority For Canadians

by Bruce_Owens

Canadians looking at their home mortgage refinancing options
should note a sea change in emphasis in the Bank of Canada�s
policy focus that is affecting, and will in all likelihood
continue to affect, Canadian mortgage markets. Well, perhaps not
a sea change, but there has been a decided shift in emphasis
amongst Canada�s central bankers from spurring the economy
through the use of rate cuts, back to keeping a wary eye on
inflation.

The Bank of Canada ended a series of six consecutive cuts to its
main interest rate on June 10th when it elected to leave its
overnight lending rate at its current 3.0%. (The Bank of Canada�s
main rate is the interest rate it charges banks, credit unions
and other financial institutions to borrow money for short
periods. Banks and other financial institutions peg their prime
lending rates on variable rate mortgages to the Bank of Canada�s
main rate, while the market for Government of Canada bonds �
which also fluctuates in response to where the Bank of Canada
sets its main rate � tends to set the price for variable rate
mortgages.) Recent comments by top officials at Canada�s central
bank indicate that the Bank of Canada�s concern has shifted from
stimulating the economy to ensuring that inflation in the
Canadian economy stays within the central bank�s projections for
2008 and into 2009. Currently Canada�s inflation rate is skirting
the top of that projected range.

Bank of Canada Governor, Mark Carney, commented on the potential
inflationary threat to Canada�s economy from spiking energy and
commodity prices in an interview with Montreal�s La Presse
newspaper at the beginning of June. Gov. Carney�s comments
presaged comments by U.S. Federal Reserve Chairman, Ben Bernanke,
speaking from a meeting of the G7�s central bankers in Spain
about rising energy and commodity prices and the threat that
rising inflation posed to an already slumping U.S. economy.

Despite such fair warnings, most industry analysts were caught
by surprise on June 10th when the Bank of Canada opted not lower
its main rate for a seventh time, as most industry insiders had
expected. In the press release that accompanied the Bank of
Canada�s announcement that it would not further adjust its main
rate, the reasons cited for the Bank of Canada�s decision to
stand pat were, not surprisingly, higher than expected global
growth (despite U.S. market woes) and higher than expected
commodity prices. This, at a time when world oil prices were
setting daily records on their, as yet, unabated climb.

On July 15th, the Bank of Canada reconvenes to once again
examine and perhaps reset its main lending rate. Home owners in
Canada with a mortgage renewal decision to make should keep this
in mind when considering the most recent comments coming from top
Bank of Canada officials.

In a June 19th speech to a Calgary conference on Commodities,
the Economy and Money, Gov. Carney observed that �the best
contribution that the Bank of Canada can make to help all
Canadians reap the benefits of the current commodities boom is to
remain focused on achieving its inflation target.� Similarly, the
Bank of Canada�s Deputy Governor. Sheryl Kennedy, in a June 23rd
speech on �Real Estate, Mortgages and Monetary Policy� presented
to the Investment Industry Association of Canada continued to
hammer home the Bank of Canada�s mounting concerns about
inflation. �The aim of monetary policy in Canada is to keep
inflation low, stable and predictable, close to our 2 per cent
target for total CPI,� Ms. Kennedy noted.

The most recent numbers from Statistics Canada, released June
19th, show that the consumer price index rose 2.2% in May,
principally driven by a 15% rise in gasoline prices. As spiraling
gas prices trickle through the economy, hiking prices for food
and nearly every other item that is transported by truck, it
seems likely that inflation will remain above the Bank of
Canada�s 2.0% target, putting pressure on them to raise their
main rate.

The best advice for Canadians who are examining their home
mortgage refinancing options is to speak to their mortgage broker
or a mortgage advisor at their bank or credit union before
mid-July when the Bank of Canada reconvenes to consider its
lending rate. Given that inflation remains above the Bank of
Canada�s target and there appears to be mounting inflationary
pressure because of rising gasoline and other commodity prices,
it seems unlikely rates are going down in the near term. It seems
more likely, rather, given the recent comments from Mr. Carney
and Ms. Kennedy, that interest rates could be going up by
mid-summer, making now the time for Canadians to examine their
home mortgage refinancing options.

If you are a homeowner in Canada with a home renewal decision to
make and are considering your <a
href="http://www.canadianmortgagesinc.ca/home_equity_loans/home_mortgage_refinancing.html">home
mortgage refinancing options</a>, visit CanadianMortgagesInc.ca
for more information from a Canadian <a
href="http://www.canadianmortgagesinc.ca/mortgage_brokers.html">mortgage
broker</a>, or call 1-888-465-1432 for a no-fee consultation with
an experienced broker agent.

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