Quote:
Originally Posted by StylinRed
the other day in the news it was suggested, once again, that the BoC will go to negative interest rates, like several other countries, where banks will be charged for holding onto money (forcing them to spend)
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just to clarify, central banks charging negative rates and end users being charged negative rates are entirely different things.
The ECB has introduced negative rates, but i still have 0.9% in my savings account (which is crazily high). The move is more to force banks to lend (multiplier effect of businesses borrowing cheaply and investing in producing assets, hiring people, etc.), not hold deposits, this is not a push consumers to blow money on the latest iphone
thinking about how this will effect mortgage rates, I would suggest two considerations:
1) if the US market doesn't go negative, and 5 year bonds inch up, the canadian mortgage market will likely not go down for fixed rate mortgages.
2) for variable rate mortgages, the margin banks charge may go up as bank deposits will be costing them, they must make it up elsewhere.
there are many forces at play in the world of money supply, so it is never as simple as this, but i would not expect rates to go down in perpetuity, and if they were to do so, i'd be more worried about my job because it's an indication of a horribly sick economy.
low / negative rates are not good news, we should not celebrate them.