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The Effect of Global Crisis resulting to Low Interest Rates in Canada



The global financial crisis in 2008 marks low mortgage rates in Canada. The credit crisis gives the Bank of Canada the option to hold a low rate benchmark to stimulate the economy of Canada if it gets down due to this financial crisis in the US and Europe. The main purpose of this low interest rate or mortgage is to encourage consumer spending for the growth of economy and for its speedy recovery from recession.


The issue on low interest rates makes lots of demand in the real estate industry and looks attractive and a good opportunity to those who are first-time home buyers because of the fact that the government requirement on affordability drops which may result to bidding wars if cannot be prevented. The household debt in Canada is on its peak and is continuously rising which would result to unwanted consequences in the future.


The global crisis also affects majority of the homeowners in the local branch and increases debt level. A mortgage is a way to determine the status of the economy, this need to be reviewed and optimized. Most of the homeowners do not utilize the mortgage funding services, which informs the borrower to modify the mortgage payment in order to reduce amortization and save interest including the adjustment of mortgage renewal. It is important to plan when the mortgage will set for renewal if it reached by 6 percent.


Now, mortgage rates continues to be low because of the uncertainty in our global market creating a massive debts and deficits in the US government. The fixed interest rate on mortgage float by 3% helping the mortgage holders save more since they are paying on a fixed level of interest rate that contributes to lots of monies to pay down principal mortgage. The inflation hedge technique was developed carrying the plan that mortgage must be pro-active so that when it is reviewed it will project the adjusted renewal rate. In renewal, the balance of the mortgage debtor is adjust to eliminate payment shock.


The lower interest rate in Canada may pull future demand and lead a void in the near future. Another concern in the status of low mortgage rates in Canada is that its people are getting used to it and has no plan on a high interest rate environment. If mortgage renew, few years from now, it may cause chaos which is an unwanted consequence. The bottom line is that there is still uncertainty on the lower fixed interest rate which may lead to bad economy. But if people will be taking a debt in a responsible plan of paying can be a good thing not just in Canada but also in the global economy. Meanwhile, there are reports that the main reason of debt is the daily expenses and not mortgage or even education. Furthermore, Canadians spend to consume and not to spend in the hope of creating more wealth in future.

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