2010 interest rates?

  • kanabel

    Status: Forum Member

    Posts: 107
    Joined: 24 Sep 2007
    From: Edmonton

    Hello everyone!

    Interest rates are predicted to increase in 2010, and I've seen some investors are hedging now against higher rates (opting for fixed instead of variable). Even though nobody expects them to jump sky high, they are expected to rise as soon as January. What's your take on it and anticipation of 2010 prime rate change?

    Cheers

    Dejan
  • gwasser

    Status: Forum Member

    Posts: 1,194
    Joined: 22 Oct 2007
    From: Calgary

    Regarding interest rate trends, there are all kinds of contradictory signals. The case for rates moving up is obvious, firstly a rapidly improving economy puts pressure on potential inflation and an overheated real estate market (did I say that?). Also, the enormous government expenditures and a falling U.S. dollar coupled with exploding gold prices seem to support this case.

    On the other hand, the demographics put baby boomers in their savings years. The money stored in money market funds and other short term interest vehicles considered nearly as good as cash is staggering. Strangely enough, I just read that since 2007 the cash build-up has not necessarily reflected the stock market levels as it normally tends to do. Also, in the U.S. the savings rate has changed from minus 3% to plus 7%, i.e. a lot less consumerism and that is a sign of declining spending and a languishing economy. Furthermore, companies are deleveraging at an incredible rate. Rather than lending money, dividends have been cut, e.g. Manulife, Algonquin Power or they have not been increased as normally (Canadian Banks). Also, numerous companies have raised equity in the stock market in spite of relatively low stock market prices. All this has lowered loan demand and so interest may stay lower a lot longer than most expect.

    Personally, I enjoy the low rates as long as I can. I suggest you keep on stress testing your investments for various interest rates as advocated by Thomas Beyer.

    ---
    Godfried Wasser

    I love investing
    Un-Retired Geologist who also was a Realtor-

    http://www.canadiandiversifiedinvestor.com/

    e-mail: nicecalgaryrental@gmail.com

  • ThomasBeyer

    Status: REIN™ Member

    Posts: 9,910
    Joined: 30 Aug 2007
    From: Alberta and BC - The Top 2 Places on the Planet to live and invest !

    QUOTE (kanabel @ Dec 6 2009, 09:24 AM)
    Hello everyone!

    Interest rates are predicted to increase in 2010, and I've seen some investors are hedging now against higher rates (opting for fixed instead of variable). Even though nobody expects them to jump sky high, they are expected to rise as soon as January. What's your take on it and anticipation of 2010 prime rate change?

    flat until mid 2010 .. then a very gradual rise .. maybe 0.5% higher in a year from now (i.e. Dec 2010)

    Economy is still weak .. and any sharp rise in interest rates will kill any economic greenshoots !
    Thomas Beyer, Honorary REIN Member & Member REIN Advisory Board
    President, Prestigious Properties [@facebook .. @twitter]
    T: 403-678-3330 E: tbeyer at prestprop dot com - www.prestprop.com

    >>> Read here how use your RRSP or TFSA for real estate or  here for our latest investment opportunity in Alberta for as little as $20,000 <<<
    >> My book "80 Lessons Learned on the road from $80,000 to $80,000,000" is out: order it on Amazon or as an e-book for Kindle, iTunes or kobo format <<

                                  
  • wgraham

    Status: REIN™ Member

    Posts: 638
    Joined: 14 Sep 2007
    From: Canmore

    Read this doc for a detailed forecast of rates and markets

    http://www.rbc.com/economics/market/pdf/fmm.pdf

    personally I think we are in for a modest increase as Thomas pointed out. With Variable mortgages in the prime minus range again I am moving back to VRM products for my next purchases
  • Rickson9

    Status: Forum Member

    Posts: 837
    Joined: 27 Oct 2009
    From:

    QUOTE (kanabel @ Dec 6 2009, 11:24 AM)
    Hello everyone!

    Interest rates are predicted to increase in 2010, and I've seen some investors are hedging now against higher rates (opting for fixed instead of variable). Even though nobody expects them to jump sky high, they are expected to rise as soon as January. What's your take on it and anticipation of 2010 prime rate change?


    I don't waste my time thinking about things that are unpredictable.

    "Thousands of experts study overbought indicators, oversold indicators, head-and-shoulder patterns, put-call ratios, the Fed's policy on money supply, foreign investment, the movement of the constellations through the heavens, and the moss on oak trees, and they can't predict markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack." - Peter Lynch, One Up On Wall Street
      
  • ThomasBeyer

    Status: REIN™ Member

    Posts: 9,910
    Joined: 30 Aug 2007
    From: Alberta and BC - The Top 2 Places on the Planet to live and invest !

    QUOTE (Rickson9 @ Dec 6 2009, 03:11 PM)
    I don't waste my time thinking about things that are unpredictable.

    ..

    good for you .. but perhaps real estate or any business for that matter is not for you then as you must make some reasonable assumptions about the future !

    For example: if you think that interest rates will be 18% in 2011 then having all your assets in cash is probably a good idea (as opposed to buy real estate)
    Thomas Beyer, Honorary REIN Member & Member REIN Advisory Board
    President, Prestigious Properties [@facebook .. @twitter]
    T: 403-678-3330 E: tbeyer at prestprop dot com - www.prestprop.com

    >>> Read here how use your RRSP or TFSA for real estate or  here for our latest investment opportunity in Alberta for as little as $20,000 <<<
    >> My book "80 Lessons Learned on the road from $80,000 to $80,000,000" is out: order it on Amazon or as an e-book for Kindle, iTunes or kobo format <<

                                  
  • mortgageman

    Status: Forum Member

    Posts: 527
    Joined: 31 Aug 2007
    From: Edmonton, Alta.

    The Bank of Canada is in a difficult position. The high dollar is having a negative impact on manufacturers and exporters. Since most of these are in Ontario and Quebec where the majority Canadians live, the BoC has to tread lightly. On the other hand as the recovery takes hold inflation make start to take off. If it increases interest rates to fight inflation the dollar will go higher and hurt Ontario and Quebec manufacturers and exporters.
    So rates will likely increase in 2010 but not quickly and not significantly.
    Jason Scott
    Mortgage Associate
    TMG The Mortgage Group
    C. 780.720.2490
    F. 1.888.477.8310
    E. jason.scott@mortgagegroup.com
    Web www.refinancealberta.ca
  • Rickson9

    Status: Forum Member

    Posts: 837
    Joined: 27 Oct 2009
    From:

    QUOTE (ThomasBeyer @ Dec 6 2009, 08:44 PM)
    good for you .. but perhaps real estate or any business for that matter is not for you then as you must make some reasonable assumptions about the future !

    For example: if you think that interest rates will be 18% in 2011 then having all your assets in cash is probably a good idea (as opposed to buy real estate)


    I would say that a person who is interested in predicting or foretelling the future that real estate or any business for that matter is not for them because it is a waste of time.

    Everybody has an opinion about interest rates and in order to strengthen their argument they pull out a number of economic indicators, historical data and 'credible' sources (the modern day equivalent of cat guts, monkey bones and goat gizzards). The problem is that any opinion about the future can be backed up with this kind of data rendering the base opinions worthless to me. Peter Lynch has it right.

    If I think that interest rates will be 18% in 2011... so what? Does that make me immune from being wrong? One person with 3 PhDs thinks that interest rates will hit 1% in 2011. So what? Another guy with 4 PhDs and a billion dollars thinks that it's going to be 30%. So what?

    I don't care how smart a person is or what evidence they use to support their prediction; I would bet that they can't meaningfully beat the flip of my lucky loonie.

    What I find very interesting is that despite all our social and technological advancements that we still listen to foretune tellers in the 21st century. My prediction is that this won't change even in the 31st century.

    "Three economists went out hunting, and came across a large deer. The first economist fired, but missed, by a meter to the left. The second economist fired, but also missed, by a meter to the right. The third economist didn't fire, but shouted in triumph, 'We got it! We got it!'" Epic.
      
  • marchse

    Status: Forum Member

    Posts: 1
    Joined: 7 Dec 2009
    From:

    thought there would be a hike in interest rate for equity investment...
    I hope there will be a change in 2010.
    no one knows what happens next!!
    ________________________
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