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Good News for Homeowners-No Interest Rate Increase until 2013

That’s good news for homeowners with variable-rate mortgages and consumers financing loans and lines of credit tied to the prime rate.

A big Canadian bank predicts the slumping economy will put interest rates on hold, or moving lower, until at least until 2013.

In an interest rate outlook released Tuesday, the Bank of Montreal said it does not expect interest rates to rise again until the early part of 2013.

That’s about six months later than earlier forecasts that rates would stay flat until the fall of 2012 as the Bank of Canada tries to boost the sagging economy.In the bank’s report, BMO Capital Markets senior economist Michael Gregory said the weaker global economy has squeezed commodities, the Canadian dollar and undermined growth in Canada.That has kept inflation in check and made it more likely the Bank of Canada will hold the line on rates.In fact, Gregory said, there is a good chance the central bank will cut rates over the next six months — by close to half a point.The BMO report also projected the loonie will settle at around 93 cents U.S. next year.”During the second half of 2012, with global economic and commodity price prospects improving, the currency’s fortunes should shift with a flight plan back to parity by January 2013.

Furthermore, another major Canadian Bank said, “A worsening outlook will keep the Bank of Canada from raising interest rates until at least March 2013”, according to the Toronto-Dominion Bank forecast on Tuesday.TD, Canada’s second biggest lender, became the first of the country’s big banks to push out its forecast for a rate increase into 2013, citing intensifying downside risks in the United States and Europe.