Refinancing Your Mortgage May Cost More in 2009

The cost of refinancing a mortgage is likely to go up next year. Or so says the panel of experts polled by the Financial Post in its most recent piece on the state of Canada's economy. The FP reports that, "Most economists expect Bank of Canada Governor Mark Carney to keep interest rates at 3% in 2008 before hiking them in 2009 as inflation becomes more of a concern and the U.S. economy picks up." This is not a unanimous consensus, however, as Scotiabnak senior economist, Adrienne Warren, reportedly forecasts interest rates to drop a half-a-percentage in the first half of 2009 in order to boost economic growth.

"Of course a consensus of the leading economists opinion is just that - a consensus of opinion. And the consensus opinion was wrong, when the Bank of Canada held its interest rate steady at 3.0% to head off inflation instead of dropping it a half-percentage point as consensus opion and the financial markets expected. Given unexpectedly good news trickling out about the state of the manufacturing sector in the recessionary U.S. economy and gas and commodity prices that are still sky high, don't be fooled if Governer Carney and the financial pundits at the Bank of Canada gain buck the consensus opinion and marginally boost lending rates - perhaps a quarter point - out of an abundance of caution over rising inflation.

"What seems clear is that interest rates are bound to rise in response to rising energy costs, and that once the U.S. rebounds from its self-induced housing and credit crisis and begins to re-enervate a sagging auto and manufacturing sector, interest rates north and south of the U.S. Canada border will be on the rise. Canvassing your mortgage broker for the best rates and terms available for refinancing with a fixed-rate mortgage may be a prudent move for homeowners concerned about the possibility of interest rates that seem poised to rise.