{"id":13872,"date":"2017-03-29T09:00:49","date_gmt":"2017-03-29T16:00:49","guid":{"rendered":"http:\/\/www.nexusnewspaper.com\/?p=13872"},"modified":"2017-03-27T14:23:48","modified_gmt":"2017-03-27T21:23:48","slug":"calculated-thought-the-impact-of-higher-us-interest-rates","status":"publish","type":"post","link":"https:\/\/www.nexusnewspaper.com\/newsite\/2017\/03\/29\/calculated-thought-the-impact-of-higher-us-interest-rates\/","title":{"rendered":"Calculated Thought<\/em>: The impact of higher US interest rates"},"content":{"rendered":"

Anyone who follows this column may notice I talk a lot about interest rates. When understanding the impact of interest rates, its easiest to think of them as the cost of money.<\/p>\n

Money has been cheap for a long time. Low mortgage rates have undoubtedly added to our housing woes. They make it easier to manage fat mortgages; up goes demand and prices follow. In the bubbly areas, especially Toronto, supply has shrivelled up. Whether it\u2019s fear of not wanting to pay sky-high prices for a new home if they sell, fear they\u2019ll miss out on more gains, or both, no one wants to sell, and it\u2019s pushing prices higher.<\/p>\n

The Bank of Canada hasn\u2019t budged, and has kept the overnight rate at 0.5 percent. As pointed out before, this rate influences the prime rate charged by commercial banks. Alas, around 75 percent of Canadians have fixed-rate mortgages, and those rates have little to do with central bank policy or prime rates, and everything to do with bond markets.<\/p>\n

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Calculated Thought<\/em> is a column dealing with student finances that is featured in every issue of Nexus<\/em>.<\/figcaption><\/figure>\n

The problem is, the bond market knows no borders. It\u2019s international, and it dictates how banks borrow and lend their money. Even the orange dude couldn\u2019t keep the bond market from jumping the fence into the US.<\/p>\n

Positive job numbers, higher growth, and higher confidence due to the promise of less regulations, as well as more favourable tax policy on corporations, have led to the US central bank to steadily raise their overnight rate. Up go bond rates and ditto for fixed mortgage rates; not just in the US, but Canada too, eventually.<\/p>\n

Worse, the gap between US and Canadian interest rates messes with our dollar. Investors go to the markets with the highest return, and higher US rates offer that. Down goes our dollar, and hindered is our central bank\u2019s ability to keep the overnight rate steady, pressured by a growing greenback and a lurching loonie.<\/p>\n

This all won\u2019t happen overnight, but upward pressure on interest rates doesn\u2019t bode well for our debt-riddled nation, especially those who mortgaged $1-million shacks in Vancouver.<\/p>\n","protected":false},"excerpt":{"rendered":"

Anyone who follows this column may notice I talk a lot about interest rates. When understanding the impact of interest rates, its easiest to think of them as the cost of money. Money has been cheap for a long time. Low mortgage rates have undoubtedly added to our housing woes. They make it easier to […]<\/p>\n","protected":false},"author":2,"featured_media":12581,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[5,186],"tags":[],"class_list":["post-13872","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-columns","category-march-29-2017"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t