Middle Eastern Turmoil vs Canadian Mortgage Rates

Today oil prices are at their highest levels since September 2008. The cause of course is from the civil unrest the world is seeing from the Middle-East.  It started in Tunisia, then Egypt, and most recently Libya.  If the unrest continues for some time, or starts to spill over to larger oil producing countries, then oil prices may continue to rise.

Now what does this have to do with mortgages? Well quite a bit. Although it’s not directly related there are many variables that may indirectly affect mortgage rates in Canada.

Oil is a factor of all production, from manufacturing to transportation. So if the price of oil is high, this creates inflationary pressure on our economy. The Bank of Canada protects against inflation by increasing interest rates, meaning higher variable mortgage rates.

However, the stock market is taking a bit of a hit because of the uncertainly, leading to a higher demand for bonds. Higher demand for bonds means decreased bond yields, which leads to downward pressure on fixed mortgage rates.

Depending on how severe and how long this worldly unrest lasts for, the Alberta economy may start to see a boost, with increased investment into the oil sands, potential increased drilling, and oil production.

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