Euro still struggles – Canada still sound!

It is no surprise the Bank of Canada left its overnight lending rate unchanged recently.

The global economic outlook isn’t all that “rosy” considering the issues in Europe. If anyone of those countries go bankrupt it will likely be like dominos, as other European countries fall too.

Before anyone gets too worked up, I think it is interesting to note that this type of thing has happened before. Think about Mexico, Brazil, and Russia. Russia went bankrupt at the end of the 1990′s (depending what you read it was 1997 or 1998) and seems to be economically sound today.

Bankruptcy has some benefits: the main one being that a country (person or company) can restructure is operations, costs, and debt (sometimes wiping it out) so that it can emerge stronger. Think about how much the North American auto sector improved after its last round of bankruptcies.

So here’s the real story: There is so much uncertainty about what will happen that our Bank of Canada is taking a very cautious “wait and see” approach. They will not raise our overnight lending rate too quickly for fear of slowing our economy down and hurting consumer spending. It is fairly likely that the Bank won’t change it’s rate until the end of 2012 or early 2013. That means mortgage shoppers can expect low rates for some time!

Chris Bisson – The Mortgage Centre