Do you have a variable rate mortgage? Are you holding off on locking in because, you know, rates are probably going to stay low forever? Well, that could all change very soon — and very quickly.
Previously, market experts insisted that rates would not rise until early 2013 amidst uncertainty about the global economic market. But, given some strong economic indicators for March and April, experts are changing their tune. Mark Carney, the man who wields the power at the Bank of Canada, could be poised to raise rates as early as Q3 of 2012.
During March and April, the Canada went on a hiring spree. Canadian employers added 82,000 jobs in March and 58,000 jobs in April. These back-to-back increases are the strongest since 1981 according to the Financial Post.
Another leading indicator of economic performance, and one near and dear to the hearts of BuzzBuzzHome, is housing starts which were also unexpectedly strong. Seasonally-adjusted starts increased from 214,800 in March to 244,900 in April according to the CMHC.
Pretty great stuff, right? New jobs, new homes… new growth! But as Canadians have more money, they tend to spend it and drive up prices. That’s called “inflation” in not-so-fancy economic terms. The mandate of the Central Bank is to keep inflation low, so Mark Carney will not take it lightly. In the name of the value of the Canadian dollar, he will increase interest rates to curb Canadian spending.
That all being said, the most important indicator has yet to be released. GDP growth in Q2 will be the primary determining factor behind whether Canadians see interest rates begin to rise earlier rather than later.
So the question remains unanswered for now. If job growth and housing starts are enough to offset disappointing growth Q1 GDP growth, then rates will rise earlier than you think. If not, then stick with your variable rate for now (but stay tuned).