Did you ever think you would see this day? The Bank of Canada prime rate is down to 2.5%. I almost need help saying it. My lips just don't purse enough to speak of interest rates that way. The message that one must take from this is that somone wants you and I to borrow more money.
The governor of the Bank of Canada, Mr. Mark Carney, is pulling out the stops now to turn the Canadian economy away from the reef. He and the government of Canada with its stimulus package are trying to steer the economy away from danger and into the deeper waters of economic prosperity. They want us to throw away our collective pessimism and begin spending money so that together we will get the economy moving again. What should we conclude? Obviously, pessimism is at an all time high and if it persists, it is likely to contribute to a longer and more painful recession. 
I am being told by a my mortgage specialist that if rates go much lower, the government will soon be paying us to borrow money. I know she speaks with tongue in cheek but honestly, I hope it never comes to that. Interest rates are so low now that it will be difficult for any of us to borrow should ever they rise to 8% again. The memory of these low rate levels will be too sharp to ignore. Who could tolerate anything near the double digit financing of the past.
Do you remember that only a few years ago there was a sentiment for a while that we would never see single digit mortgages again? In the late 1980's and early 90's, I recall trying to find houses with an assumable mortgage with a lower rate than the posted rates. If you found one with 10% or less, the house was sure sell a little quicker. We would remark that those people who had 7% mortgages were obviously in their homes for 25 years or more because a 7% mortgage was ancient history.
Well now the rates have been down below 10 % since 1991 and have been trending downward for almost 19 years. In fact they are well below that 7% mortgage of years ago. I don't claim to be an economist but in my view, it is probably time to start expecting a bottom. It turns out that many economists have been getting it right less than 50% of the time so that puts my opinion at least on par with the economists if not slightly better. It seems like only yesterday we were told that the world was doing just fine. Boy did the wheels come off the wagon fast.
I think it is fair to say that when economic pessimism is at an all time high interest rates are probably at or near a bottom. So I suggest that now would be a pretty good time to lock in your debt at the lowest possible rate available. A mortgage rate of 4% to 5% is probably going to be one of those mortgages that everyone will be looking for a few years from now. And, if you need to consolidate high interest debt, now would be a good time to do it. Remortgage the home and bring your credit card or line of credit debt down to zero. Then you can pay off the mortgage over the next few years at a much more manageable rate.
Even if the rates stay down for a while longer, it is my expectation that we will see them move up from here rather quickly once the ship turns away from the rocks and begins sailing into deep waters. A couple of points saved on a $100,000 is going to add up in the long run. Now is probably a good time to act and lock in that mortgage. I bet Mr. Carney will be doing it too unless he doesn't have much debt to worry about.
R. Greg Osmond is a Platinum Award winning Realtor serving St. John's and surrounding areas, Newfoundland and Labrador for over 20 years and can be reached at 709-895-2500. Visit http://www.rgregosmond.com/for further information. Find him on facebook and be a friend.
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