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Term Life Insurance Canada: The News in the Interest Rate World

Times have changed drastically in the world of home loans because of recent happenings. What’s up next for us now? Is there any way to guess if the rates will continue to improve?

Tight conditions in the mortgage world should normally mean lower rates, since banks would have to lower rates in order to attract customers with good credit ratings. But it sems that banks are actually raising rates, in the hope that will improve their revenue.

Under other circumstances, this would seem like a bad choice since the usual route to increased earnings is to lower prices. This shortsightedness is not limited to the home loan industry; credit card companies are doubling and even tripling their rates in reacton to defaults on the part of customers in this depressed economic environment.

It used to be that when the economy slowed down, banks would lower their interest rates and this would give an incentive to borrowers. But with the lending industry in turmoil, it seems like none of the old rules count.

So what is the solution for a potential homebuyer with the right credit score to borrow? Wait for this phase to pass and for rates to come down or grab a loan now, while there is still some credit around, or wait for the fallout from the recession?

Not only is there a current, there are many who even believe there is a depression coming, which will surely lead to deflation. Normally, deflation will in turn lead to lower interest rates, so this indicates a wait and see attitude is the best to take right now.

Some lenders are still actively seeking borrowers. Many small lenders never had the capital to delve into the giant home loan programs that many of the larger banks did. In this case, being small was an advantage, since many of them were insulated from the problems now haunting most of the credit industry.

A second good argument for waiting is that home prices continue to plummet, with predictions of futher price cuts of as much as 35%, even after the 20 to 25% decreases already seen. The Case-Schiller study published in November of 2008 reported year on year decreases of 17% nationally, with 25% in some areas. If the scenario is set not only for decreased rates, but also for lower home prices, it would seem wise to wait until more of the credit crisis fallout can be judged.

http://www.classic-realestate.com/term-life-insurance-canada-the-news-in-the-interest-rate-world.html

reviewed by Moishe Alexander, CFC canadian funding corp CEO