Move by biggest banks a favour for Carney, who has pledged to keep Bank of Canada rate low

(Source: Globe and Mail)

The central bank has said it expects to keep its key short-term lending rate locked at 0.25 per cent until mid-2010 to spur an economic recovery. Chartered banks, however, are finding their borrowing costs increasing for longer-term money, as investors bet that improving economic conditions will eventually bring more inflation.

By raising their mortgage rates and making it more expensive for customers to borrow money for a home, the banks are effectively throwing some cold water on residential real estate. That, in turn, might allow the Bank of Canada to keep its short-term rate unchanged as pledged.

Read Steve Ladurantaye’s full article “Mortgage rate hike could cool housing rebound” in the Globe and Mail (October 14, 2009).

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