As I talked about in my previous newsletter the Bank of Canada did reduce the overnight rate by 1/2 %. The lenders moved very quickly to reduce their prime lending rates by the full ½%. This is great news for those with existing variable rate mortgages, as many people will now have their interest rates under 2% starting in April. Where does this leave us? What we do know is that at the most the short-term interest rates can drop another ½%. Analysts are split on what the bank will do next but many are saying they think that the Bank of Canada may reduce rates by a further ¼% but will not drop the overnight rate to zero. Looking at many forecasts it looks like rates will remain low until the third quarter of 2010. And then depending on which analyst you want to follow we could see the Bank of Canada raise rates by ½% in the third quarter of 2010 and a further 1/2 % in the fourth quarter of 2010. From what I can see it still makes sense to stick with the variable rate options if you have a prime minus variable. Even if rates do go up by 2% you will still be better off than locking in at the current five-year rates, which are in the 3.99% to 4.09% range. On the real estate side more people purchased homes in March than I saw in February. This was a combination of first time buyers and those looking to move up to their next home. If there was a common theme from the people making a move it was that they could finally purchase a move and do so without being house poor.