Are rates going lower? Tagging onto an earlier post about how the Fed can minimize falout from US housing and sub-prime woes by keeping rates down, a Financial Post article by Ray Turchansky last Tuesday points to lower rates in the future.
Brad Willock, of RBC Asset management Ltd. is quoted as saying “The single most important thing…is the US short term interest rate, determined by the Federal Reserve”. Currently the overnight rates are 5.25% in the States and 4.25% here. Low unemployment in the US mitigates against further rate cuts, but inflation seems to be disappearing as a threat. While these two things seem to run counter to each other, Willock predicts a rate cut in May, June or July, with raes continuing to fall over the next 18 months.
Benjamin Tal, of CIBC World Markets, is quoted as predicting settledrates in general, and lower short term rates in particular, given the slowing economies in the States and Canada.
Nick Majendie of Canaccord Capital is also quoted, and agrees that with slowing economies rates must fall. He’s a little more pessimistic, using the word “recession”.
In a separate article Keith Woolhouse points out that in today’s complex mortgage market the best rate isn’t necessarily the best price. Service, restrictions and pre-payment penalties all factor in to determining what exactly is the “best”rate.