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June 1, 2010
Rate hike
Business professor Andrey Pavlov says today's Bank of Canada hike is "modest, and you can still get a very low rate because while interest rates are increasing the discount the banks are offering is also increasing. Even with no discount, today's rate rise would only result in an extra $60/month or so on a half a million dollar mortgage. Hardly relevant." On the other hand, he says, "The economy is clearly growing very fast, creating jobs and raising incomes. This stimulates demand at a greater pace than modest increases in interest rates. Plus, there is the threat of inflation, which makes real estate a good purchase." And on the subject of whether to lock in or go variable, he adds: "Variable-rate mortgages are still a much better deal than fixed rate mortgages, so I wouldn’t suggest people lock in."
Andrey Pavlov, andrey_pavlov@sfu.ca, 604.763.3696
Business professor Andrey Pavlov says today's Bank of Canada hike is "modest, and you can still get a very low rate because while interest rates are increasing the discount the banks are offering is also increasing. Even with no discount, today's rate rise would only result in an extra $60/month or so on a half a million dollar mortgage. Hardly relevant." On the other hand, he says, "The economy is clearly growing very fast, creating jobs and raising incomes. This stimulates demand at a greater pace than modest increases in interest rates. Plus, there is the threat of inflation, which makes real estate a good purchase." And on the subject of whether to lock in or go variable, he adds: "Variable-rate mortgages are still a much better deal than fixed rate mortgages, so I wouldn’t suggest people lock in."
Andrey Pavlov, andrey_pavlov@sfu.ca, 604.763.3696