What has Happened Historically after Large Prime Rate Increases?
OH you guys I found some amazing STATS! They can make sense to everyone and are purely factual which is why I can never contain my excitement. While I went through several scare articles before getting to this, this one was so good I'm sharing it.
Thank you to the Financial Post for gathering this amazing information, to see the article in it's entirety ( "Interest rates are still rising, but investors should start preparing for when they come back down") click here to go to their website. Here is some of the main info:
Let’s do a quick review of the six rises and falls since 1994.
In October 1994, the Bank of Canada’s overnight rate was 4.94 per cent. Over the next four months, it rose significantly to 8.125 per cent — a rise of 3.2 percentage points. Over the following nine months, it declined to 5.94 per cent, and one year later it was sitting at three per cent. This was a large rise and fall historically, but it outlines how quickly rates can rise and how steep the ultimate decline can be.
The next period of rate adjustments saw the overnight rate rise to 5.75 per cent from three per cent over a 15-month period in 1997 and 1998. The subsequent decline wasn’t as steep, but it did drop over the following nine months to 4.5 per cent in May 1999.
In October 1999, the rate was still 4.5 per cent, but then rose to 5.75 per cent by May 2000. One year later, it was back to 4.5 per cent and it was all the way down to two per cent by January 2002.
Over a 25-month period from March 2002 to April 2004, the rate went from two per cent to 3.25 per cent and back to two per cent.
During a relatively prosperous time, the rate rose to 4.5 per cent in July 2007 from 2.5 per cent in August 2005. But the financial crisis of 2008 started to rear its head, and rates fell first to three per cent by April 2008 and all the way to 0.25 per cent a year later.
Nikole again, it's a very good article (I know I don't say that often lol) but it is. I would suggest reading it all.
Thanks for checking this out!
Nikole Krupka Rolof
Edmonton Mortgage Broker