“Like low interest rates? Get used to them for a while longer.” 

So wrote CIBC Chief Economist Avery Shenfield last week in the CIBC World Markets Report on Canada’s inflation rate, and homebuyers’ ears are pricking. 

Despite the tightened purse-strings that go with a serious economic crisis, historically low mortgage rates mean right now might just be the best time to take on a new mortgage.  For those with existing mortgages, it’s also an opportunity to refinance to lower rates and more manageable payments. 

After a series of rate slashes, the Bank of Canada took the prime rate down to a slim quarter of a percent earlier this year, a figure officials have committed to hold through 2010 barring “inflationary” issues. 

However economists believe inflation will not be a factor in the coming year, and that the quarter basis point rate could even hold through to 2011. 

The CIBC report indicates inflation will be held in check by the effects of the global recession for some time yet. 

“As a result, Canada’s inflation rate will be no threat to the Bank easily fulfilling its pledge to keep interest rates at a slim quarter point through mid-2010,” said Mr Shenfield. 

“Indeed, if as we expect, sluggish final demand keeps the economy on a tamer trajectory than the Bank hopes, it will be able to defer the first hike until early 2011.” 

All of this is good news for prospective homeowners – and incentive to push up plans to buy, instead of waiting for rates to rise again. 

Low rates mean more than just savings, though these can be quite significant, especially in the early days of a long-term loan.  For those whose income has been impacted by the recession, lower interest rates can mean lower payments for the short term, making a mortgage affordable despite difficult times. 

The government also raised the limit on their Home Buyers Plan, allowing first-time homebuyers to draw up to $25,000 against their registered retirement savings to put as a down payment on a new property.  The fiscal stimulus appears to be working, as the Canadian resale housing market appears to be rebounding in the third quarter of 2009 according to the latest figures by the Canadian Real Estate Association. 

For those who are already locked in to the higher rates of two or three years ago, refinancing is an option well worth exploring.  While penalties do exist for breaking a mortgage agreement early, the interest savings, reduced payment, debt consolidation and access to equity can well offset the price of cashing out early. 

Penalties are calculated differently from bank to bank, so those who are not familiar with the terms of their agreement should review them carefully with a mortgage broker to make sure they will come out ahead when they refinance.   

Douglas Melville, Canada’s new banking ombudsman, said the most common complain to hit his office this year is about mortgage pre-payment penalties by those looking to refinance.