Higher Payments For Those That Can't Afford It The Most

It was reported in the Globe and Mail that MBNA has increased their minimum payment

by 66% in an effort to reduce their exposure to the record debt levels that Canadian's carry and not to save their clients money by paying less interest as they claim. You can be sure that other issuers will follow, especially American Issuers as they struggle with their own operations in the USA.

For many people this will be enough to put them under water with their cash flow. So more than ever people will need to refinance and there will be less concern of how much the penalties are more concern about increasing cash flow.

There may also be a concern of rising interest rates that have prompted them to be pro active instead of reactive on this issue. I doubt there will be any imediate interest rate increases since there are so many negative things happening in the world today that runaway inflation in Canada is not likely to occur and they are still running a risk of deflation.

OTTAWA - With the Canadian economy doing surprisingly well over the past six months, many thought higher interest rates from the Bank of Canada, but according to a report released Thursday from CIBC's chief economist Avery Shenfeld, rates are likely to remain very low.5% through to 2011.

In CIBC World Markets' latest Global Positioning Strategy report, Mr. Shenfeld lists several reasons for Bank of Canada Governor Mark Carney to keep interest rates subdued after July. He points out that the U.S. will probably have a more gradual approach to raising rates.

"While factories are recovering in Canada alongside a global industrial revival, output remains nearly 20% below the pre-recession peak, and wages are now substantially above those stateside without the productivity gains to match. There's only so much of a competitive challenge that non-resource exporters can take in short order," Mr. Shenfeld said.

He also pointed out that inflation is not expected to rise much further and stimulus spending is expected to be ending in mid 2010 as goverments address their huge budget deficits - including Canada's - which will slow growth.

"If the U.S., the U.K., and Japan all move from huge stimulus to even modest restraint, Canada will feel it in our export prospects come 2011," Mr. Shenfeld pointed out.

Mr. Carney has promised to keep interest rates where they are at 0.25% until the end of June. However, the latest reading of Canada's economic growth showed the core inflation rate at 2.1% in February, far above the Bank of Canada's forecast of 1.6% for the first quarter of the year. many analysts beleive the bank od canada was going to start sooner than June 2010.

by: Paul Mangion

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